Renewables and Alternative Energy - Energy and Capital

An Energy Bill for 2008

We could've had this discussion back in June.

It was then that the House passed two energy bills—after weeks of partisan bickering—that wouldn't have any significant long-term impacts on energy supplies or prices.

In late June, the House passed HR 6052, which would provide transit agencies with grants to expand services and subsidize fares. They also passed HR 402-19, which would authorize federal regulators to take "emergency steps" to tighten oversight of oil futures trading.

Neither of those bills has been voted on by the Senate.

Of course, around the time those two less-than-meaningful bills were passed, Congress was also debating other, more meaningful policies, like extending the investment tax credit and production tax credit, opening up the strategic petroleum reserve, and allowing offshore drilling.

None of those measures ever came to fruition.

Then, in late July, these issues came up again, right as Congress was scheduled to begin its five-week recess.

Here are a few bills that were discussed in the two weeks before their vacation, as provided by Reuters:

REIN IN MARKET SPECULATORS. Senate Democrats were blocked from getting a final vote on legislation to curb excessive speculation in energy markets. The bill would have imposed tough position limits on speculators, restricting the number of oil futures contracts they can control. A similar House bill was voted on, but failed. It sought to rein in speculators trading energy and agricultural commodities.
LOW INCOME HOME ENERGY ASSISTANCE PROGRAM. The Senate bill would have doubled to $5.1 billion a federal program that helps senior citizens and poor families pay their summer cooling and winter heating bills.
TAPPING THE STRATEGIC PETROLEUM RESERVE. The House bill would have sold 70 million barrels of oil from the U.S. emergency crude stockpile, which supporters said would have put more supplies on the market and lowered prices.
ENERGY TAX CREDITS. The House bill would have extended renewable tax credits for producing electricity through wind power and installing solar energy equipment
DRILL NOW OR LOSE IT. This House bill would have required oil companies to diligently develop their existing federal leases or return them to the government and require yearly leases in the National Petroleum Reserve in Alaska.

None of those measures were passed, either.

Many other bills have been proposed and were either never debated, passed by only the House or the Senate, or vetoed.

Will We Have an Energy Bill in 2008?

Well, there's hope.

Before their vacation, a group of five Republican and five Democratic senators, called the Gang of 10, composed a comprehensive energy bill. After initial resistance from both sides, the ideas in the bill are now gaining traction.

In fact, three more senators from each party have joined the effort.

Basically, the proposal is something that any rational person could've come up with months ago. Here's a very brief rundown:

Certain areas of the Outer Continental Shelf will be open to drilling and boosting nuclear power, while incentives for wind, solar, energy efficiency, and other renewables will be extended by eliminating $84 billion worth of tax breaks enjoyed by the oil and gas industries.

But there are issues, as usual. I have my own view of the resistance this plan will face, but Business Week does a very nice job:

As the compromise gains momentum, it is creating dilemmas for both parties. There are plenty of reasons to be against it. For one, John McCain's choice for running mate, Alaska Governor Sarah Palin, is a strong advocate of opening up new areas like the Arctic National Wildlife Refuge to the oil and gas industry. Polls also show that Republicans are getting a major boost by blaming Democrats for blocking increases in oil and gas supplies, so why would they give up their best campaign issue? "One man knows we must now drill more in America and rescue our family budgets: ... McCain," says one ad for the GOP Presidential candidate, which accuses Democratic rival Barack Obama of standing in the way.

A compromise with the Democrats would "cut the knees off of Senator McCain," Rush Limbaugh recently charged on his radio show. In addition, oil and gas companies are leaning heavily on their GOP friends to oppose the plan. "Opening up a very, very minor area [to drilling] and punishing the industry while doing it makes absolutely no sense," says Charles T. Drevna, president of the National Petrochemical & Refiners Assn. For their part, Democrats fear losing support among core constituents if they vote to drill.

But despite the possible opposition, the fact remains that our nation is facing severe energy problems. And consumers (read voters) are growing increasingly hostile with rising energy costs, both for transportation and the home.

An Energy Bill Prediction & Financial Implications

My view is that the presidential election is too contentious for any significant legislation to pass. The GOP will filibuster anything that looks like it has a shot to avoid taking stump issues away from their candidate.

And even if a comprehensive bill was passed, President Bush has said he will veto any bill that repeals taxes for the oil and gas industry.

So here's how I see it.

As I told Wealth Daily readers the other day, discussion over energy legislation, specifically regarding the solar energy investment tax credit, has reached a fever pitch.

Consumers who want lower prices at the pump think that opening up new drilling would immediately and significantly reduce prices. For that to happen, offshore drilling would have to instantly add new oil to the world markets, which it won't. Though it probably would have a negligible, short-term psychological effect on prices.

The other side of the coin is job loss and the destruction of vital industries. Not extending the renewable energy tax credits would lead to $19 billion in lost investment and over 115,000 lost jobs.

No politician wants to be responsible for that.

Not only that, I've heard from numerous CEOs, association heads, and politicians that renewing the tax credits is a priority and they won't be made to expire. Plus, Congress generally passes meaningful energy and tax legislation at the end of the year and wraps up unfinished business.

That said, I think we'll at least see an extension of the tax credits, even it's done late in the year and buried in a piece of unrelated legislation.

To be prepared, it's worth picking up some of the solar stocks that have taken a beating lately, and ride them on the way back up.

I like solar installers as the first play here. They're the ones that have the most to lose if the credits aren't extended, and their stock performance lately certainly reflects that.

When it's passed, I'd want to be in Clear Skies Solar (OTCBB: CSKH) and Akeena Solar (NASDAQ: AKNS).

I'd also look for some bargain bin solar stocks that have a solid history of performance, and could break out on positive tax credit news. Take a look at SunPower (NASDAQ: SPWR), Suntech (NYSE: STP), and the sleeper, Evergreen Solar (NASDAQ: ESLR).

My service, Alternative Energy Speculator, has already positioned a group of savvy investors to reap hefty profits when this deal goes down.

But this one event certainly isn't the only way we're making money. I've recommended three stocks to my readers in the past three weeks. They're each up, and they're poised for much more.

Check out how I'm navigating investors through these troubled waters.

Call it like you see it,

Nick

PS. It seems with all the market madness lately that the discussion about carbon markets has come to a standstill. But there's no doubt they will have an impact on the energy markets of the future. To stay on top of things, I'm heading to the U.S. Carbon Finance Forum in a few weeks. Feel free to check it out for yourself.

U.S. Investment in Renewable Energy

Over the past few months, the renewable energy industry has struggled to maintain investor confidence as Congress continued to drop the ball on the renewable energy production and investment tax credits.

They're set to expire at the end of the year. And if that happens, renewable energy stocks are sure to fall.

Now before you draft your hostile e-mails about how renewables should be able to compete without subsidies, I call your attention to the billions in subsidies the oil industry receives every single year.

I can assure you, NO form of energy generation exists without some form of subsidies.

And if you don't believe it, take a look at this 2007 article written by my colleague, Chris Nelder. It spells out the whole dirty secret that no one in Washington wants to admit about fossil fuel subsidies.

U.S. Renewable Energy Tax Credits...by way of Stupidity!

Last Saturday, Nancy Pelosi signaled her willingness to consider opening more coastal areas to oil exploration. If this happens, it could certainly enable a bipartisan effort to get those tax credits extended through a long-awaited compromise.

Now don't get me wrong. Opening up offshore drilling is a bad joke with an even worse punch line.

If we started drilling today, we'd have a very small flow of new oil coming online in about a decade. This would be well after the global peak of production, and provide little relief to the average Joe trying to get a tank full of gas.

Of course, some have suggested that had we just done this ten years ago, we'd have all that lovely oil flowing right now. And that's true.

Though, in another few years, we'd be right back where we started — sitting here with our thumbs in our mouths, trying to figure out how to fill up our SUVs with rhetoric and fairy dust.

Meanwhile, the dolts in Washington continue to blatantly lie in an effort to placate the voters just a little longer.

Take a look at what House Minority Leader John Boehner said in response to Pelosi's announcement about the Democrats' willingness to consider offshore oil exploration:

"Our message to Speaker Pelosi is very simple: We are ready to vote on more energy production and lower gas prices right now, and we should not wait one more day to begin giving the American people the relief they expect and deserve. If you meant what you said last night, we welcome you and your Democratic colleagues to join us in our historic call to action on American energy."

Historic call to action? Really?

Well, I guess history is filled with "historic calls to action" that ultimately led to disaster. So they won't be the first.

Either way, this latest news does lend a bit more confidence to the possibility that the production and investment tax credits will be extended. At this point, it's really a matter of whether or not these bureaucratic parasites decide to actually get some work done when they come back, or spend their time campaigning... slinging mud on our dime.

It'll probably be a little of both.

Though, as we saw over the past couple of weeks, with or without those tax credits, renewable energy momentum is not slowing down.

Renewable Energy Investment, without Hesitation

Last Thursday, Pacific Gas & Electric (PGE) announced that it had signed contracts to buy 800 megawatts from two solar power plants that will be built near the Central California coast. Combined, these plants will produce enough power for about 240,000 homes.

The companies that landed these deals?

SunPower Corporation (NASDAQ:SPWR) and Optisolar.

This project is the largest single photovoltaic commitment from an electric utility in the world, according to the Solar Electric Power Association.

The SunPower project will begin power delivery in 2010, and the Optisolar project, which is twice as big in terms of megawatts, is expected to begin power delivery in 2011.

Not surprisingly, SunPower soared on the news, picking up as much as 22% by the next day.

Google's Impact on Renewable Energy

This past Tuesday, Google Inc. (NASDAQ:GOOG) announced that it was investing $10.25 million in Enhanced Geothermal Systems (EGS). The funding is going to...

· Seattle-based AltaRock Energy Inc. to develop technologies that will enable cost reductions and improved performance in EGS projects.

· Redwood City-based Potter Drilling, Inc. to develop new approaches to lower the cost and expand the range of deep hard rock drilling, which is critical to large-scale deployment of EGS.

· Southern Methodist University Geothermal Lab to update geothermal mapping in North America.

No publicly-traded companies involved here. Though if you're looking for a geothermal play, your safest bet would be with Ormat Technologies (NYSE:ORA). Or, if you're looking for more bang for your buck, check out U.S. Geothermal (AMEX:HTM). It's an up and comer that's actually generating megawatts and money right now.

Also on Tuesday, New York Mayor Michael Bloomberg outlined his proposal for more renewable energy in New York City. The Mayor wants to build offshore wind farms, small-scale wind installations and tidal power systems to supply no less than 10 percent of the city's electricity needs.

According to aides, the mayor has recently met with T. Boone Pickens to discuss how wind power could be used in New York City. And certainly you've seen what T. Boone's done for the wind industry in just the past month. Not to mention the money investors are making off of his transitional energy stocks.

On Wednesday, Suntech Power (NYSE:STP) announced that its sales and profit climbed significantly in the second quarter.

Sales rose more than 50 percent from a year ago, and profit rose to $64.9 million for the quarter, compared to $41.7 million a year prior. The company also raised its 2008 revenue forecast to a range of $2.05 billion to $2.15 billion from a range of $1.9 billion to $2.1 billion.

The stock ended the day with a 12.4% gain.

Still, STP wasn't the biggest solar winner that day.

No, the biggest winner was Solarfun Power Holdings (NASDAQ:SOLF).

Incidentally, this is a stock that Alternative Energy Speculator editor Nick Hodge recommended about five months ago when it was trading around $9.40. By Thursday, the stock hit $21.26 a share

That's a gain of more than a 126% - in just five months!

If you'd like to see Nick's latest pick, which is actually a company that's making money hand over fist thanks to T. Boone Pickens and his Pickens Plan, click here now.

To a new way of life, my friends. And a new generation of wealth...

Jeff

Clean Energy Stocks

Mary Sawaya has seen a 50% increase in business over the past five years.

She sells work boots and Carhartt overalls in Kemmerer, Wyoming.

But the work boot market hasn't always been so bullish.

According to Sawaya, "About 10 years ago, [the energy industry] was in a slump. And then when Williams Field built their second plant and [Enterprise Products Partners LP] came in, and all this oil and gas cycling came through ... our business went way up."

Job growth in Wyoming has been the strongest in the nation over the past few months. The state's budget surplus is a whopping $571 million.

A recent local news report claimed the state and its citizens have benefited from the sale of coal, oil, and natural gas. But, the report claimed, "Natural gas has really been the biggest money maker in the past couple of years. It's boosted the whole state, but especially the towns that are really close to the energy fields."

Notice she didn't say oil fields.

Before I get into the clean energy stocks associated with this energy boom, let's take a look at some of the market forces behind the push...

Natural Gas: The New Transportation Fuel

No, it's not oil that's fueling this modern day boomtown—it's natural gas.

You see, many of the world's largest oil fields, including those from which the U.S. gets large amounts of imports, are in decline. This is a fact that is not going away. In fact, Cantarell, Mexico's supergiant and a large source of American imports, declined 28% last year. At that rate, it will be gone in four years.

To make up for this (and many other) declining fields, energy (not oil) companies are racing to pick up the slack. Indeed, we really can't produce any new additional oil until we find and produce enough to offset the decline of major fields.

So everything is on the table. Biofuels, tar sands, oil shale, deepwater, and yes, even natural gas liquids. We need them all. And we need them to be recovered responsibly.

This is what The Pickens Energy Plan is all about. Using our domestic supply of natural gas—like the fields in Wyoming—to increasingly fuel our cars. Some of the electricity that was once produced with large amounts of natural gas will then be shifted to cleaner wind-based power.

This all comes down to energy security and independence. Importing 66% of all oil and oil-based refined products makes no sense at all (and hasn't for a long time).

But, as I've said before, Boone's efforts aren't entirely selfless. The billionaire, who currently serves as chair of BP Capital, has large claims in clean energy, natural gas- and wind-related companies and projects.

He's got a $12 billion stake to build what, until recently, was considered to be the world's largest wind farm on the Texas panhandle (Clipper and BP recently announced a wind farm that would be even bigger). Pickens also has heady interests in natural gas fueling companies and in natural gas engine manufacturers.

And with the amount of financial weight he brings to the energy party, you can bet policymakers are responding.

California has already set forth a ballot initiative that would allow the state to invest in the burgeoning market for natural gas-fueled cars and trucks. The measure, which currently faces no opposition, would free up $5 billion to fast-track the deployment of a million natural gas vehicles on California's roads.

The presidential candidates, for their part, are each taking meetings with energy guru.

If you like the plan or hate it, it's fair to say we're going to see a bump in the nation's use of wind energy and natural gas as a vehicle fuel.

Clean Energy Stocks: From Wyoming to Your Portfolio

Earlier in the article we discussed the effects the natural gas boom is already having in small Wyoming towns. That's because Wyoming is a hotbed of liquefied natural gas activity.

The associated economic benefits of the increased use of natural gas aren't being monopolized by Wyoming's citizens. Liquefied natural gas specialists operating in the area, like Enterprise Products Partners (NYSE: EPD) and Williams Partners (NYSE: WPZ) will also see a nice bump.

But the companies that stand to make the most financial gain are those providing liquefied natural gas and natural gas engines to the end market.

T. Boone himself has 40% claims in companies that operate in those sectors.

And you should have your claim, too.

The liquefied natural gas and engine companies in which T. Boone is invested have returned 10% and 107% respectively over the pat year.

And that was before the Pickens Plan and huge natural gas bull market came into play.

I've prepared a full report on how you can instantly start profiting alongside billionaire oilman T. Boone Pickens.

Those that have followed his lead over the past few years have made millions. And you should be getting your fair share.

Call it like you see it,

Nick

The Renewable Energy Markets

Has green lost its luster?

Of course not. Yet that seems to be the attitude of more than a few.

Sure, solar stocks have been battered over the past few months. But didn't the Dow (Index: DJI) go from over 13,000 to below 11,000 in the same time? Indeed, it did.

And hasn't Exxon Mobile (NYSE: XOM) gone from nearly $95 to to about $75 in the same time? Indeed, it has.

Even the incessantly-talked-about Transocean (NYSE: RIG) is down 15%. . . in just the past two months.

So for renewables to be dismissed as bad investments by bulls of other energy sectors is not only wrong, it's quite hypocritical.

Indeed, with the world's largest oil fields being depleted—some by as much as 15% per year—and natural gas facing a similar long-term plight, we're going to need all the energy we can get. And there's plenty of money in all of it.

But you must realize, new oil discoveries, and even arctic and offshore drilling, are certainly no catholic cure. In fact, the amount of oil they're providing—and could potentially provide—is absolutely not enough to offset rising demand and oil field depletion, not to mention that oil is increasingly more expensive to extract. This is an often overlooked aspect of new oil finds.

Yes, there's money to be made from the remaining oil and the companies that refine the ever more heavy and sour crude. And I'm not against making that money.

But to think that there will be no serious energy transition to include a large share of renewables coupled with efficiency is naïve at best, and moronic at worst.

That said, let's look at the billions of dollars that continue to pour into the green sector even during this progressively bearish market.

Renewable Energy Markets: Investment Magnet

According to New Energy Finance, one of the world's most highly respected renewables analytics firms, private equity and venture capital deals in cleantech surged to a record $5.8 billion in the second quarter.

If the technology had no future, would it be bringing in record investment dollars at the most foundational levels? Hardly. Surely you can remember the internet naysayers of the 1990s. And look how that turned out. . . you're reading this on the internet, and it's marvelous.

These green technologies that are being invested in today on a very nascent level are going to be the energy juggernauts of the future. From my perch, it's inevitable.

But back to that second quarter $5.8 billion investment, which, by the way, is more than double the $2.6 billion invested in the first quarter.

You know where that money went: wind, solar, and second generation biofuels.

And speaking of oil companies and second generation biofuels, check out where BP (NYSE: BP) thinks transportation fuels are headed. On Wednesday, they announced a $90 million partnership with Verenium (NASDAQ: VRNM), to speed the development of cellulosic ethanol.

Verenium shot up over 75% on the news. . . in two days.

More affirmation of the ethanol market came this week when the EPA decided to uphold the increased Renewable Fuel Standard (RFS) signed into law last December, which increases the amount of renewable transportation fuels used annually to 36 billion gallons by 2020—16 of which must be cellulosic ethanol.

Texas Governor Rick Perry had requested that the EPA cut the RFS mandate by 50%. He lost.

Back to green energy investment. . .

Beyond second generation biofuels, wind and utility-scale solar continue to be hotbeds of investment. According to a recent Wall Street Journal Environmental Capital posting:

Wind energy in the U.S. is still going strong, despite the lingering uncertainty over congressional extension of tax credits for clean energy. The American Wind Energy Association today said second-quarter wind-power installations fell slightly from the first quarter, to 1,194 megawatts. But the wind lobby said 2008 should be another record year overall, with more than 7,500 megawatts installed, provided Congress finally renews the tax credits.

Power companies in the U.S. and Europe are increasingly looking to new types of solar power for big clean-energy installations, rather than do-it-yourself rooftop arrays. Biofuels have gotten a bad rap, but the next generation-made from stuff you can't eat like waste wood and algae-is drawing multi-million dollar investments.

We now know that pre-public cleantech companies are still attracting gobs of investment.

So what's the problem with publicly traded companies?

Publicly Traded Renewable Energy Companies

Part of the problem stems from the fact that renewable energy companies are finding increased resistance to listing publicly. This is do to instability in the overall equity markets fueled by a credit crunch, a mortgage mess, and a weak dollar.

That precarious situation has shelved several cleantech IPOs, making it harder for early-stage investors to recoup their investments.

Even though companies raised $5.2 billion in public markets during the second quarter, over half of that came from just one listing: Portugal's EDP Renovaveis.

Nonetheless, that $5.2 billion was monstrous jump over the dejected $1 billion during the first quarter—a sign that conditions may be starting to improve.

Until conditions completely improve for new entrants, one must embrace the current culture of the market.

There are plenty of bargains to be had in these troubled waters. Great companies, across all renewable sectors, have been beaten down as a function of broader market conditions.

Chinese solar companies, for example, are painfully oversold. And their rebound to levels of old will certainly provide gains congruous with the amount of of their recent losses—about 46%, on average.

I'm talking about companies here like JA Solar (NASDAQ: JASO), Solarfun (NASDAQ: SOLF) and Yingli (NYSE: YGE).

The same holds true for other renewable sectors.

Indeed, the bull market in energy is long from over. In fact, we're just in the first inning. The downturn in energy stocks due to negative external conditions is only a bump along the way.

As long as demand continues to rise exponentially—and we all know it will—then the energy, and particularly the renewable energy, bull market is destined to press on.

Call it like you see it,

Nick

P.S. My Alternative Energy Speculator continues to make money in this difficult time. By employing a strategy that consistently uncovers oversold and underloved cleantech stocks, readers of that publication are sitting on no less than six double digit winners. Check out just one of the recent opportunities.

Investing in Green Building

You've read it many times before in these pages...

Despite the environmental benefits of green building, it is primarily the proven economic benefits that are moving the industry from niche to mainstream.

Here's a perfect example of what I'm talking about:

The California EPA Headquarters Building in Sacramento—with systems calibration, monitoring, and maintenance for energy performance—delivers annual savings of nearly $200,000. And after-hours heating and lighting controls as well as the building's exterior lighting systems add another $110,000 of yearly savings.

Just these few efficiency and conservation upgrades have resulted in a savings of more than a quarter of a million dollars per year for that one building!

And those don't even include the annual savings from:

Grounds management
Water-efficient landscaping
Elimination of garbage can liners
Collection of recyclables
Occupant recycling

Overall, $500,000 was invested in efficiency upgrades, operations, and employee practices. A total of $610,000 is now generated in annual savings.

The initial investment was recovered in less than one year!

Granted, this is just one example. But no matter how you slice it, whether it's $610,000 in annual savings or $6,100 in annual savings, investing in green building pays off.

In fact, just in energy costs alone, green buildings average a 33 percent energy savings compared to conventional buildings.

So while our bloated bureaucrats in Washington argue over how to deal with high energy prices (while trying to preserve their jobs and those huge campaign contributions), we're focusing much of our attention these days on one of the most obvious solutions — green building.

Green Gets Aggressive

Commercial and residential buildings in the United States used 40 quadrillion Btus (quads) of energy in 2005, at a cost of $300 billion. That number is now expected to increase to 50 quads at a cost of $430 billion by 2025.

So it's no surprise that California—a state with a desperate need to beef up its energy infrastructure without crippling its economy—is once again taking the appropriate steps to ensure the state's energy security.

To date, California has adopted the most aggressive energy conservation and efficiency policies in the U.S. Combined with robust investment, the Golden state now saves enough electricity every year to avoid building 24 large power plants (i.e. - 500 MW or more).

In fact, according to a report issued by the California Public Utilities Commission, the average cost of energy efficiency programs is roughly half the cost of baseload power generation.

Back in 2004, California also instituted Governor Arnold Schwarzenegger's Green Building Initiative, which mandates a 20 percent reduction in electricity consumption in state buildings by 2015.

And now, California's at it again.

A few weeks ago, the California Building Standards Commission adopted a green building standards code for all new construction statewide.

The new code takes effect in 180 days. It will be voluntary until 2010, when the code is expected to become mandatory. Essentially they allowed the voluntary period so builders and local governments have time to adapt to the new rules.

The new standards code covers residential and commercial construction. It also includes schools, hospitals and other public institutions.

Some of the code's targets include:

· Energy efficiency

· Water consumption

· Dual plumbing systems for potable and recyclable water

· Diversion of construction waste from landfills

· Use of environmentally sensitive materials, including eco-friendly flooring, paint, and insulation.

Three Green Building Stocks to Watch

Certainly consumers benefit from the implementation of aggressive green building standards because they eventually help stabilize energy costs.

But investors can also benefit, as these standards will provide a flood of contracts for those publicly-traded companies operating in the green building sector.

Just a few include:

· Interface, Inc. (NASDAQ:IFSIA) - Green carpet products for both residential and commercial markets.

· Energy Focus Inc. (NASDAQ:EFOI) - Ultra-efficient fiber optic lighting systems that reduce energy consumption

· Comverge, Inc. (NASDAQ:COMV) - Smart Thermostats that cut heating and cooling bills by 15%

There are also solar installation companies that are going to benefit from all of this.

After all, solar will play a major role in power generation for many of these new buildings. And somebody has to install these systems.

All in all, California continues to set the standard for the nation when it comes to transitioning our energy economy. But will the rest of the country catch on?

Absolutely!

The economic benefits of green building are too appealing to ignore. And the next President, regardless of who takes the election, is likely going to institute some kind of federal incentive program that will almost certainly give the green building industry a serious shot of steroids.

It's never been a better time to be a renewable energy investor!

To a new way of life, and a new generation of wealth...

Jeff

Who's Afraid of the Big Bad Three?

As I wandered the Plug-in 2008 Conference this week in downtown San Jose, California, I had an un-original but startling thought: Is Silicon Valley the new Detroit?

For a trade show and conference that is essentially about cars, this one looked nothing like any car show I've ever seen. In fact it looked like a typical computer trade show. The place was swarming with smart, well-dressed 20-somethings and gray hairs were few. Only a handful of cars were on display in the exhibit hall. And the sessions were decidedly technical, preferring performance curve charts and hard data over flashy videos.

These attendees weren't interested in body styling or macho demonstrations of horsepower. They had an entirely different set of things on their minds, like peak oil, climate change, and the uncertain future of transportation.

From the presentations I saw, one thing was clear: These young technologists aren't waiting for the Big Three to lead us into a new era of personal transportation. They're unafraid to admit that we have some serious problems, and they know that we have very little time to accomplish an unprecedented technological revolution. They aren't beholden to the gas-burning technologies of the past. And they're accustomed to working at light-speed, compared to the glacial speed of innovation that characterizes the lumbering old automakers.

Step On It!

Andy Grove, former CEO of Intel, kicked off the conference with a bold challenge to convert 10 million existing gas guzzlers to plug-in hybrids within four years. By comparison, Toyota has only built one million Priuses to date. But for a computer company chairman like Grove, such a challenge is just the thing that gets his juices flowing.

He didn't just issue the challenge, though. He's got plenty of ideas on how to pull it off: A federal tax credit to offset half the cost of the conversion, paid for by licensing fees on all cars, boats, and planes. Give the electricity away for free for the first two years. Harness open source collaboration to speed development. And call on the venture capitalists of Silicon Valley to fund the innovations that are needed.

Transforming our rolling stock so that it can run on mostly electricity is, as another famous computer industry mogul likes to say, a "no-brainer." Peak oil means we have a looming shortage of liquid fuels, but all renewable energy technologies make electricity, not liquid fuels.

With the latest battery technology, most PHEVs can run 40-60 miles on electricity alone. According to Anant Vyas of the Argonne National Laboratory, a 60 mile electric range is enough to offset 75% of vehicle miles traveled.

That could take a hell of a bite out of our consumption of petroleum.

James Winebrake, an expert with the Rochester Institute of Technology and Department of Energy alum, noted that the $500 billion [more like $700 billion now] that we spend on foreign oil is enough to buy every American driver a "neighborhood electric vehicle" over a four-year period.

He calculates that hybrid electric vehicles (HEVs) and plug-in hybrid electric vehicles (PHEVs) could replace 40% of our existing fleet by 2030. In the process American households would save $316 million dollars a year, even after accounting for the increased electrical demand, since electrically-powered miles costs a fraction of gas-powered miles. (A typical The economic benefits of the shift, he says, extend across the entire economy as more jobs are created and more discretionary income is freed up.

And that doesn't even include the benefits to public health, transport outside the household sector, and general economic development and capital costs.

A Great Race to Save Society

Dr. Andy Frank, a professor of mechanical and aeronautical engineering at UC Davis who is credited as being the father of the plug-in hybrid, broke the numbers down in his keynote address.

We have 200 million cars on the road today, but we only make 15 million new cars each year. So at best, if the country's entire auto manufacturing capacity were to build nothing but PHEVs, in 10 years we could only replace about 50% of the fleet. (Other speakers suggested the replacement rate might run as high as 7-8% per year, but did not cite details.) [This section has been corrected from the original version; please see note at the end of this article.]

Peak oil and rising prices, along with global warming, are such urgent and serious challenges that we simply have to move faster than that. "We are in a great race to save society," he said, and offered his prescription on how to accelerate the transformation to a transportation fleet 90% powered by renewable energy:

Replace and modify vehicles, because replacement alone is too slow. We might replace 1-5% of the fleet per year, but we could modify 10-15% (20-30 million) per year. (That makes Grove's call to modify 10 million in four years seem slow!)
Offer government subsidies to help drivers buy PHEVs, to overcome the initial higher cost of the vehicles and create the surge in demand that will drive innovation and more rapid production. He observed incisively that the subsidy would be justified by the future cost of diminishing oil, which nobody seems to take into account.
Add plug-in outlets everywhere, to overcome the chicken-and-egg problem of having a PHEV but nowhere to plug it in. This is hardly a radical idea, he said, noting that outlets are already a ubiquitous feature of parking spaces in Canada, where drivers plug in during the winter to run heaters that keep their engine blocks from freezing. We already have parking meters with electric power supply in many places, he asserted, so adding plugs to them would be trivial and relatively cheap.

Frank has founded a company called Efficient Drivetrains, Inc. (EDI) to make an end-run around the big car companies and deploy PHEVs much more quickly. "GM and Ford are in the business of never buying or licensing anybody's technology," he said, and if they violate your patents, they'll say "so sue me," and you'll lose. So instead of even trying to talk sense into their thick skulls, he's focusing on the 400 other car companies in the world, supplying them with drivetrains and components, licenses to existing technology, and an open approach to collaboration.

His objective is bold and clear: "To see that the world moves toward electrification of the entire society in an integrated fashion to enable greater energy efficiency for higher improvement in productivity and lifestyle with a zero CO2 footprint."

He's not afraid of the Big Bad Three. And neither are we.

What's Hot—and Not

The Plug-in 2008 Conference concluded yesterday, the same day that Ford announced yet another sweeping restructuring as it staggered under an $8.7 billion loss for the quarter. CEO Alan Mulally, who's been struggling at the helm of the company for two years to turn its fortunes around, acted decisively. He issued new marching orders to retool three of its pickup and SUV factories to produce six models of the smaller, more efficient cars it currently makes in Europe. It's a good move for Ford, but for the moment, they're so Not hot.

But PHEVs? Nothin' but hot.

Jeff Siegel has long been in hot pursuit of the companies with the best designs for lithium ion batteries, the power pack of choice for the new generation of PHEVs, and has recommended several of them for Green Chip Stocks subscribers. The rest of the components that will enable the PHEV revolution, like new high-efficiency electric motors, innovative transmissions, and software control systems, are also on his radar.

PHEV technology has been around for 15 years, and all-electric cars have existed for over 30 years. It's mainly Detroit that has stood in the way of its progress, as many have learned from the documentary film Who Killed the Electric Car? But now, thanks to their own myopia, they're on the ropes.

Silicon Valley is about to snatch their crown. With a fertile ground of fresh ideas, plenty of VC, and a $130-a-barrel wind at their backs, the question is not if you will ever drive a PHEV or EV, but when.

Based on the presentations I saw at the conference, I'm expecting to be able to buy PHEV technology for myself within the next two years. Perhaps it will be a conversion from EDI, a standard production line Mitsubishi, the Prius "2.0," or a sleek all-electric Tesla.

But I don't think it will be a Chevy Volt.

Until next time,

Chris

P.S. Bridging the gap to using clean, efficient energy isn't going to happen overnight. That means investors like us now have a perfect opportunity to take advantage of the burgeoning interest in clean technology. If you're interested in learning more on how you can profit from these trends, feel free to take a look at the Alternative Energy Speculator.

Correction - July 26

Thanks to the readers who pointed out the incorrect numbers in the section on Dr. Andy Frank's talk. I'm not sure what happened there, but I suspect it was a typo in my notes. Unfortunately I was unable to find data that precisely matched what I thought he said. Running the calculations again and using data I located online, I made the smallest possible edit, to correct the replacement figure to 50% over 10 year. Here is a sample of the data I found:

According to the OICA, there were about 247 million registered highway cars and light trucks in the U.S. as of 2005. The U.S. makes about 11 million per year (a 4% per year replacement rate), but sales run about 17 million per year, according to the Automotive News Data Center. The definitions of what constitutes a "car" or "light truck" vary from source to source, and the numbers vary from year to year, so it's difficult to rationalize all the data. For example, according to ANDC, sales in the first half of 2008 were 834,000 lower than the first half of 2007, which when annualized would mean a 1.6 million decline. For the purpose of comparison to Dr. Frank's assertions, I assume he was working with slightly outdated data to come up with 200 M existing vehicles and a 15 M per year replacement rate, and that he assumed growth to about 300 million total within 10 years, resulting in a 50% replacement. So my original "in 10 years we could only replace about 5%" was probably a typo I made while taking notes during his keynote, which should have been 50%.

Looking at cars only: In 2005, OICA says the U.S. produced 4.3 M cars, where the total number of cars was about 136 M according to the Bureau of Transportation Statistics. This amounts to a 3% per year replacement rate, replacing 43 M cars over 10 years, or about 32% of the existing inventory.

—Chris

The Pickens Energy Plan

Chalk another one up to clean technology.

Legendary Texas oilman, billionaire and America's 117^th richest person, T. Boon Pickens, has unveiled a $58 million public relations blitz focused on persuading Americans to reduce their dependence on foreign oil by turning increasingly to natural gas and wind.

Called The Pickens Plan, the project calls for an estimated $1 trillion government investment to displace electricity currently produced with natural gas with clean wind power.

Then, the resultant excess natural gas capacity would be used to power cars and trucks.

T. Boone, the plan's creator, says it would alleviate hundreds of billions of dollars currently spent on oil while creating thousands of U.S. jobs.

According to Pickens, ""I've drilled more dry holes and also found more oil than just about anyone in the industry. With all my experience, I've never been as worried about our energy security as I am now."

But don't get it twisted. Pickens isn't hugging trees just yet. It's all about the bottom line, and T. Boone is heavily vested in both the wind and natural gas industries.

In fact, he's spending $12 billion on what could prove to be the world's biggest wind farm—in Texas, of all places.

Another of his ventures, Clean Energy Fuels (NASDAQ: CLNE), builds and operates natural gas fueling stations for vehicles.

Said Pickens: "Don't get the idea that I've turned green, my business is making money, and I think this is going to make a lot of money."

Making Money with The Pickens Energy Plan

According to The Pickens Plan website:

America is in a hole and it's getting deeper every day. We import 70% of our oil at a cost of $700 billion a year - four times the annual cost of the Iraq war.

I've been an oil man all my life, but this is one emergency we can't drill our way out of. But if we create a new renewable energy network, we can break our addiction to foreign oil.

Breaking that addiction is shaping up to be a multi-billion dollar business, and the "Oracle of Oil" is placing his bet right now.

It's probably wise to follow his lead. In addition to Energy & Capital, Pickens was one of the few insiders calling for $100 oil when that price seemed unfathomable. And the realization of his most recent call for $150 oil seems imminent.

Even if all the points of the plan don't come completely to fruition, the wind and natural gas industries are still poised for a boon.

Just in July, T. Boone's natural gas provider Clean Energy Fuels has:

been awarded a five-year contract from the City of Akron to operate and maintain the fueling station for the city's 45 full-sized compressed natural gas buses
received two liquefied natural gas supply contract renewals from the City of Phoenix that will add $6.7 million to the company's bottom line
secured nearly half its supply of natural gas through June 2011 by entering into an extended definitive agreement with its supplier, Williams Four Corners

Clean Energy Fuels is probably a good place to be. More and more fleets, both governmental and corporate, are switching to natural gas vehicles everyday, for both economic and ecologic reasons.

As this trend plays out, all those fleets are going to need natural gas fueling stations. And Clean Energy is the foremost player in that game.

Another lucrative way to play the emergence of natural gas vehicles would be to invest in the company making natural gas engines. This report has all those details.

The Windier Side of Energy

Pickens isn't just betting on natural gas. He also has ambitious plans to build the world's largest wind farm on the Texas panhandle—for a modest $12 billion.

Back in April. T. Boone made the first down payment on 500 wind turbines at a cost of $2 million dollars each. GE (NYSE: GE) was the lucky beneficiary of that transaction.

But that initial $1 billion (for the 500 turbines) hardly puts a dent in the now $12 billion price tag—the project was originally estimated to cost a mere $6 billion.

By 2012, about 2,700 turbines are slated to be erected on 200,000 acres of the Texas panhandle. That's four times bigger than the word's current largest wind farm.

When finished, 4,000 turbines will crank out enough electricity to power over one million homes.

But a billionaire-oilman-turned-wind-investor isn't the only indication of the momentum the wind sector possesses.

In 2007, wind received the most investment dollars of any clean technology with $50.2 billion, or 43% of all new green investment. It was also the leader in 2006 when it was responsible for 38% of new investment.

The wind industry also dominated asset finance in 2007, receiving about $38.9 billion or 46% of all new-build asset investment, which basically means steel in the ground in the form of either wind farms, solar power plants or biofuel production facilities.

To date, 94 gigawatts (GW) of wind capacity have been installed worldwide, with 20 GW coming online in 2007, led by the U.S., China and Spain.

Wind also received the most public investment in 2007, raising $11.3 billion. It should be noted, however, that $7.2 billion of that investment came just from the IPO of the world's leading wind installer and wind farm manager, Iberdrola Renovables (MCE: IBR).

The wind industry has also been a favorable environment for exits of venture- and private equity-funded companies, as well as for mergers and acquisitions. This has been evidenced by Energias de Portugal's $2.93 billion purchase of Horizon Wind and Scottish & Southern Electric's $3.2 billion purchase of Airtricity.

More recently, investor interest in wind power has heated up due to a report from the U.S. Department of Energy claiming wind can provide 20% of all U.S. Electricity needs by 2030.

For that to happen, more than half a trillion dollars needs to be invested in new turbine manufacturing capacity and capital projects. Just in the first quarter of 2008, the U.S. Installed 1,400 MW of new wind capacity with a price tag of $3 billion. Expect that trend to continue and expand.

The way to profit from this part of Pickens Plan is to stake your claim now in a variety of turbine manufacturers, both foreign and domestic, and also in wind farm developers and owners.

These could be juggernaut wind companies like Vestas Wind Systems (COP: VWS) and Gamesa (MCE: GAM), or in large development firms like Fluor (NYSE: FLR).

Of course, there's also a handful of smaller companies that stand to make a fortune as the wind industry continues to mature.

While it's nearly impossible to say which of those smaller companies are going to succeed as this story unfolds, we'll be providing daily and weekly commentary and recommendations on the matter in all of our publications:

Get ready for a literal windfall of profits.

Call it like you see it,

Nick

Global Green Energy

BERLIN, GERMANY: The number crunchers have it wrong. Energy isn't a chart; it's a culture.

Sure, Amsterdam is flat as a pancake. Still, yesterday I couldn't believe I saw more bicyclists in the Dutch capital than I ever had in my time in China, where filmstrips we all saw for years portrayed throngs of Beijing denizens pedaling the streets full.

Nary a car to be found in Amsterdam in 2008, and the Chinese capital is clogged with Buicks and SUVs.

It's taken me two weeks from Portugal to Germany, watching wind turbines blink and spin slowly as I sit aboard trains that have entire wagons devoted to bikes.

You see a lot of guys in suits on CNBC and such talking about their usually incorrect predictions for oil supply and demand: how much is speculation and how much is pure market movement...

But what I'll tell you, and what you can put your money on, is that the world's elite investors are going green.

The Global Greening of Energy and Investments

Investment powerhouse Merrill Lynch and leading consulting firm Capgemini released their World Wealth Report in June, which showed among other things that the world's most successful people are going green in ever greater numbers.

Among the high net-worth individuals—people with more than $1 million in value where their homes are not included—half say they're putting money into clean and renewable energy business opportunities.

What's interesting, though, is that the world's wealthy didn't cite the melting of the icecaps or food price concerns as their reasons for betting on sectors from tidal energy to biodegradable plastics...

They want the filthy lucre. Euros, pounds, dollars...

And like bicyclists in Europe are much more common than in the States, American investors in the World Wealth Report are a long way off pace.

Only 5% of HNWIs in the U.S. said they invest in green initiatives of any kind—a meager 10% of the worldwide average.

Of the Yankees who did say they're going green, profit potential wasn't even at the top of the list. Instead, it was for social concerns, which of course are valid.

After all, aside from taking investors' pulse, I've spoken to working people on the street in Lisbon, Madrid, Marseille, and of course here in Berlin about what renewable energy means to them... Trabalho, trabajo, les boulots...

Green Energy: Creating Jobs and Profits

Jobs.

They answer me the same way, in whatever language we're speaking. It's another major point for clean energy as part of a new global reality. That's why governments are helping to cultivate home-grown industries where they have comparative advantage. In Spain it's the sun, Portugal's got wind and waves, and here in Germany it's a blend of scientific expertise and an old industrial base that is turning former Communist East Germany into a hotbed of solar energy activity.

The stock market can only yield feel-good dividends after earnings and share prices actually rise. Plenty of ethanol investors who banked on either the inevitability or responsibility of biofuels have gotten singed in the past year of oil turmoil, which is why we've steered you away from those stocks with very few exceptions.

Indeed, the international investors who are going green are making more educated decisions. That's what we've found with our new Green Chip International service, where we invest in foreign-listed new energy stocks.

The fact is that Wall Street is no longer the only field for the best international equities players. London, Hong Kong, and even Madrid are attracting more listings because of less burdensome accounting and because as I say, the business culture outside of New York is more receptive to hearing real strategies for long-term energy options.

These days the NYSE and Nasdaq are more known around the world as the place where 20th century fortunes were made and bubbles burst.

Indian, German, Israeli and African investors I talk to all the time have their money spread around the globe, and with lightning-quick internet trading and a world's worth of information in your computer, the only risk is keeping your money in one place.

It's a new culture free of boundaries...

Green Chip International: A Global Look at Green Stocks

And as I sit here looking out the window just blocks from where the Berlin Wall stood until 19 years ago, I'm reminded of how freely innovation and investment flow in 2008.

This past weekend, French President Nicolas Sarkozy convened an impressive array of 42 European, North African, and Middle Eastern countries in an effort to establish a new Mediterranean Union.

Rumblings are widespread that this new network around the Middle Sea will be heavy on renewable energy cooperation, sharing technology and economic growth.

With Green Chip International, we're already delivering returns in markets around the world where few Americans have even thought to venture. But the intrepid ones are smiling and riding the wave of wealth that's pouring into international clean energy.

And they're happy to count themselves in the head of the pack while those stuck to Wall Street are biting their nails to the quick.

Take a look at Green Chip International. It's a stone's throw away from our tremendously successful Green Chip Stocks service, but with a decidedly more global focus.

And we know we're not alone in thinking that such a focus translates to a real advantage in today's market.

Bis spaeter,

Sam Hopkins

Mass Transit Investing

Last month, the American Public Transportation Association (APTA) announced that U.S. commuters took 2.6 billion trips on public transportation in the first three months of 2008.

That's nearly 85 million more trips than the first quarter of 2007.

APTA also announced that:

· Last year, 10.3 billion trips were taken on U.S. public transportation. This represents the highest number of trips taken in 50 years.

· In the first quarter of 2008, use of public transportation increased by 3.3 percent, while vehicle miles traveled on our nation's roads declined by 2.3 percent.

· Light rail systems had the highest increase in ridership, boasting a 10.3 percent increase in the first quarter. Baltimore's light rail system alone increased its ridership by 16.8 percent.

Still, while these are all impressive numbers, how realistic is it that these ridership numbers will continue to increase?

Even with $4.00 gas, there are many that still have absolutely no interest in public transportation.

Whether it's because of misconceptions about dirty or unsafe buses and trains, the comfort and familiarity of our own cars, or the inability of local mass transit administrations to provide convenient, efficient, and inexpensive alternatives - not everyone is jumping on the public transportation bandwagon.

In fact, in a recent Baltimore Sun article, commuters recounted their experiences with Maryland's public transportation system. Here's one that I found extremely poignant...

"The real disappointment is that I'm spending about $8 on gasoline to get to work and home. It takes me about 20 to 25 minutes one way, and I can drink my coffee while I drive.

The MTA solution takes two hours, costs about $4.30 round trip (I have to pay express fees for the #15 bus) and I can't have coffee while in the coach. The real issue here is that it costs me over 3 hours a day to save two gallons of gasoline, but only saves me $4. This, to me, is not a wise tradeoff."

Where's the tipping point?

Public transportation is a great idea. It can help relieve rush hour congestion, displace foreign oil and reduce greenhouse gas emissions.

But if it can't operate in a way that meets the demands of the consumer (especially when it comes to cost and convenience), it'll never be much more than the niche it is in most cities today.

And this is unfortunate, when you consider just how successful public transportation systems in other parts of the world are. If you've ever spent anytime in Europe, you know exactly what I'm talking about.

Of course, there's still the belief that we haven't yet hit that tipping point that'll ultimately force some commuters to finally make the transition to mass transit.

Is it $5 a gallon, $6, $8?

No one really knows.

But one thing is for sure, individual states and cities aren't waiting around to find out.

No time to wait

Across the nation, cities and states are betting big on the future of public transportation.

Some aren't even waiting around for federal funds to make new projects happen.

Thanks to legislation in 21 states that enables transit agencies to form public-private partnerships to design, build and maintain local transit networks, some cities are moving ahead without federal resources. In fact, just last year the city of Houston announced that its transit authority would be using a private partner to take four different transit corridors from concept to operation as quickly as possible.

Bottom line: Construction on some of these transit projects needs to begin now...not three years from now. So waiting around for Washington is simply not an option.

Of course, in all fairness, the House did authorize an extra $1.7 billion in funding for public transportation last month. Under the plan, $750 million would be distributed throughout urban areas, and $100 million would be distributed through rural areas.

Not surprisingly, urban areas would get the lion's share of this funding. This is primarily because traffic congestion in many urban areas is actually getting worse.

According to the Texas Transportation Institute's 2007 Urban Mobility Report, congestion in 2007 caused urban commuters to travel 4.2 billion hours more and to purchase an extra 2.9 billion gallons of fuel for a congestion cost of $78 billion.

That's billion - with a "B"

Still, whether or not this funding ever gets passed is anybody's guess.

So in the meantime, we're focusing on the individual states and cities that are moving now...without handouts from the Hill. Because this is where new public transportation projects are leading us to opportunities stemming from bus contracts, infrastructure development and train/light rail deals.

In fact, there's one mass transit company that's been building a massive backlog of regional contracts over the past year. And once market conditions ease up a bit, Nick Hodge, managing editor of the Alternative Energy Speculator, will be recommending this company to his readers.

There's not much more I can say about this particular company right now, as Nick has not revealed it to his readers yet. But if you'd like to learn more about Nick's most recent recommendation - one that's up 23% in just the past week (while the rest of the market got hammered), click here now.

To a new way of life, and a new generation of wealth...

Jeff

The Big Picture on Q2 2008, Part 2

In part 1 of this series, we reviewed the trends in financials, fossil fuels and electricity. This week, we take a look at renewables, food and fertilizer.

Renewable Energy

The picture for renewable energy just keeps getting better, as more of the world begins to realize that we are having a real problem maintaining our traditional energy supplies. I have no doubt now that a big revolution in energy has begun. Mark my words: This is the time to go long on renewable energy, for the long term.

Consider this chart of a few of my favorite renewable stocks against the S&P 500:

After being beaten down harshly in the first quarter, along with just about everything else, renewable energy shares bounced up like spring flowers, handily beating the indexes by 20% or better.

Meanwhile, the chatter about controlling carbon emissions has only gotten louder, particularly as bad weather hits everywhere (which we'll get to in a moment). I expect this trend to continue, and would not be at all surprised to see some sort of binding legislation passed within the next year.

As I have detailed in my book, I favor a carbon tax over cap-and-trade schemes, for a variety of reasons, but I would be happy to see any sort of binding controls established. When that happens, you will definitely want to be holding some solid, reputable renewable energy companies in your portfolio, because it's going to put new fire under the whole sector, even as it puts the hurts on oil and coal.

Agriculture

Food production has come about even with energy as the world's top concern since my review of the first quarter. Riots, hoarding, and intermittent shortages became more common, and everyone from the UN to the Saudis put it on the front burner.

My observation was borne out in an unexpectedly harsh way:

Not only are food and energy closely interrelated, but weather is right in the mix too. The increasing use of fossil fuels contributes to global warming, which reduces food production, as was the case with the Australian wheat harvest. At the same time, weather impacts our ability to produce energy...and back around the wheel we go.

Flooding in the Midwest this spring has ruined an estimate 5 million acres of land, and harvests have been delayed because the fields were too wet to work. While parts of the West like California had the driest spring on record, parts of southern Indiana, Illinois and Missouri have endured the wettest spring on record. (Inversely, China's agriculture ministry instructed wheat and rice farmers in southern China a few weeks ago to harvest as much of their crop as possible before another wave of rains arrived.)

With fields too wet to sow corn, many farmers opted to plant soy this year instead of corn. The corn harvest this year is expected to be 10% lower than last year, and soybean plantings are running about 16% behind last year.

Consequently, corn shot from $5.82 at the end of Q1 to a record $7.92 last week. The spike in corn prices was due to the torrential rains that soaked the Midwest starting in late May, and in a mere two and a half weeks, corn prices went up 28%.

Ethanol production is expected to increase 25% over last year, and consume about 4 billion bushels of corn out of the 86 billion that will be sown this year. In the face of record corn prices, the cattle and poultry industries have been lobbying the EPA to cut the nation's ethanol production mandate in half.

They're not the only ones. Policymakers are realizing that corn is a very inefficient way of trying to produce biofuel, and might not be worth it. (That has been my position on corn ethanol since the beginning.) The corn ethanol plays have suffered the fallout:

The one bit of good news for grains is the worldwide wheat harvest, which is expected to be about 8% higher this year than last. The expectation brought the price of wheat down from a record $13.50 per bushel on Feb. 27 to $8.70 today, about where it started the year. Still, wheat remains about 50% higher than it was a year ago, and the harvest below average levels.

The big picture for agriculture is clear enough: demand is higher than ever, and supply is faltering. (Reminds you of anything?)

The flooding of the Mississippi had another unexpected consequence: The levee breaks shut down transport on the river, stranding 100 barges. Mississippi barges are the primary mode of transport to get grain from the Midwest to export terminals in the Gulf of Mexico. Grain giant Cargill alone had 200,000 bushels of corn sitting on the dock, unable to get a barge.

If you took my recommendations on fertilizer at the beginning of Q2, you are smiling now:

FEED has clearly sold off a speculative bubble, so I wouldn't touch that one now (and I hope you got out with some nice gains, as I did). But Mosaic and Potash Corp. are still good bets to hold, because I don't see any reason to think the food supply situation is going to radically improve any time soon. In fact, this looks like a nice little buying opportunity.

As one would expect for a diversified play, the more general agriculture ETFs I suggested have performed more modestly than the fertilizer plays, but who would complain about a 10-30% gain in a quarter, especially when the S&P actually fell a few percent?

I remain bullish on the ag ETFs, at least until we get a significant change in the supply and demand balance.

Metals

The metals group I suggested hasn't done quite as well, but if you picked the better stocks over the ETFs, you made out alright:

My read of the metals group is that it's probably ripe for a recovery, as the last couple of weeks are showing. Considering that the building boom is still going strong in Asia and the Middle East, and that shortages of basic building materials like iron are still happening regularly, I think this is a good time to jump into metals if you're not in already.

On the whole, as bad as the news has been in energy, agriculture, finance, and the economy in general for the past quarter, I have to say I saw it all coming. I banked on it, and I'm still banking on it.

With an economy on the ropes, the financial sector going down in flames, food prices skyrocketing, oil prices causing widespread inflation and the Fed helpless to do anything about it, a lot of investors will end this year with a lot less money than they started it.

But not us. In fact, we expect to turn some nice gains, by reading the signs rightly and playing them smartly.

Gains like the ones you'll make from our energy picks, when you sign up for the $20 Trillion Report.

Until next time,

Chris

Energy and Capital

Brazilian Ethanol

Brazilian sugar refiners are ready to satisfy America's energy sweet tooth.

Here's what I mean, and why the Brazilian ethanol recommendation noted below is about to explode.

Finally, Free Fuel Trade

If knee-jerk reactions could power cars and planes, the world's politicians could replace fossil fuels in a matter of months.

Early in June the United Nations World Food Summit turned into a tag-team tirade against biofuels, with Egypt's Hosni Mubarak and Mexico's Felipe Calderon blaming crop-based energy sources for food riots at home.

There's a kernel of truth there, but developing world demand for food is at record levels because of human consumption, not just biofuels.

In fact, The Council of Economic Advisers and the U.S. Department of Agriculture estimate the total global increase in corn-based ethanol production accounts for only about 2-3% of the recent increase in global food prices . Truth be told, food prices are rising for the same reason as oil prices—rapidly rising demand. And we haven't even addressed the fact that oil prices have risen over 4,000% since 1973, while corn prices have risen a mere 120%. But I digress.

Brazil's Thriving Ethanol Industry

Brazilian President Luiz Inacio Lula da Silva rightly called the huffing and puffing of Mubarak and Calderon an "oversimplification," and added that he is "not in favor of producing ethanol from corn."

That's because Brazil's ethanol industry has been going strong for three decades and is producing sugar cane ethanol with an energy balance 7 times what corn returns.

Brazilian ethanol also costs less to distill from cane to automotive fuel than corn ethanol... about a full third less, at 22 cents per gallon compared to 30 cents for the U.S. stuff. And there are other solutions that haven't even entered the mainstream yet.

I've traveled around South America and heard optimism for sugar beets, jatropha, and other feedstocks you may never have heard of.

And you haven't heard of them because American politicians have been doing their best to keep them off your menu of energy options.

In fact, Congress is penalizing Brazil for getting biofuels right, to the tune of a 54 cent-per-gallon tariff.

How's that for free trade?

Well here's what's going on right now: Corn ethanol is now so expensive—around $2.80 per gallon—that even after adding 54 cents to Brazilian ethanol's $1.87 market cost, it still comes out at a price advantage to the main U.S. biofuel.

Brazilian Ethanol is Ready to Break Out

That's why we think this company's stock is going to explode.

The American electorate is fuming as gas prices keep ticking upwards, and a few politicians are now responding with a common sense policy change—removing, or at least lowering, the tariff on ethanol imports.

Democratic California Senator Dianne Feinstein says "given the record oil prices and the limited supplies of domestic ethanol," charging 54 cents per gallon more for Brazilian biofuel "makes no sense. Judd Gregg, a Republican from New Hampshire, agrees, so he and Feinstein launched a measure in the upper house to strike the absurd subsidy.

Record flooding in America's corn-producing heartland this summer just adds to the case for energy options.

After all, "energy independence" doesn't mean shutting out the best technology from other parts of the world. It's more about having multiple cards to play when something goes wrong in the energy world.

Whether it's escalating attacks in Nigeria or flooding in Iowa, far-flung parts of the globe are now tied through energy supply and demand.

"The Ethanol Business Has Completely Changed"

The Wall Street Journal says Brazilian ethanol exports should come in at around 1.27 billion gallons this year, up 37% from last year's total.

Most of that will go to the United States, with or without a tariff cut. But how will the Brazilians benefit if we drop the 54-cent innovation tax?

"I would say that without any tariff, we would export around two billion liters (527.7 million gallons) more this year and with a lower tariff, around one billion," one official at Brazil's Union of Sugarcane Industries, told the Journal.

Now, my colleague, Nick Hodge, just back from the Renewable Energy Finance Forum on Wall Street, tells me the sense on the Street is that Brazil is going to ramp up production whether or not we're smart enough to drop the duty.

European markets are now clamoring for sugarcane ethanol, and the same goes for ravenous developing countries like China and India.

"Over the last 10 days, the ethanol business has completely changed," Martinho Seiiti Ono, one of Brazil's biggest ethanol brokers, said over the weekend.

Indeed, the whole energy business is in flux. There are plenty of ways to profit as politicians scramble. We'll keep you up to date with the latest.

Regards,
Sam Hopkins

P.S. The fact is that most of the winning power innovations are coming from foreign markets these days. Whether in Brazil or Norway, Green Chip International is delivering real returns with new energy ideas, even in today's bearish market. To learn more about our Brazilian ethanol play that's about to break brand new highs, click here.

The Energy Water Nexus

Most energy solutions fail without water.

But all water solutions fail without energy.

Such was the theme at many breakout sessions during last week's Clean Technology 2008 conference in Boston, MA.

Those sessions dealt with what many industry professionals are now calling the energy-water nexus. A concept that, like the name suggests, deals with the vast issues of water consumed by energy, vice-versa, and everything in between.

The issues are complex, to say the least. And some would call it a zero sum game.

But just identifying some of the key problems can get the ball rolling on potential solutions and, in turn, massive opportunities for profit.

Here are the nuts and bolts of it all.

The Energy Water Nexus

At its core, the energy-water problem stems from the fact that we have a limited supply of each. We have a certain amount of both energy and water, and can't make or destroy either. So we have to find novel and efficient ways to use each of these precious resources.

Here's the 411 on the water situation, which may be a recap for some of you.

As any third-grader knows, the earth is covered 75% with water and 25% with land. That sometimes makes it hard for many to even consider the fact that the world is facing widespread water shortages.

But drilling down on the contents of that 75% water make-up makes it a little easier to understand.

You see, 97.5% of the water we have here on earth is saltwater, leaving only 2.5% as usable freshwater.

Of that tiny 2.5%, 79% is perpetually frozen in the form of polar ice caps and glaciers, making it inaccessible, even at high costs.

Another 20% is groundwater, some in the form of aquifers, which we've been tapping successfully for some time via wells and mains and such.

And the remaining 1% is surface water, or the lakes, rivers and streams that dot landscapes around the globe.

It also doesn't help that we've constantly polluted the tiny fraction of surface water we have for years with the dumping of chemicals, fertilizers, sewage and other pollutants.

So that's the water side of things in a nutshell. We aren't getting any more of it.

The energy connection is a bit more clandestine, especially since we don't see that side of things on a daily basis. Here are just a few of those relationships, though they can certainly be applied to numerous industries and energy-related activities.

It takes, for example, 4 barrels of water to produce just one barrel of oil. This could be water used for well-injection, cooling or a variety of other applications
The Canadian tar sands use more water than the entire population of Alberta (where they're located) on an annual basis
In the U.S., the transportation and purification of water consumers 4% of all electricity
In California, water consumes 19% of the state's electricity and 31% of its natural gas
50%-80% of desalination costs are for energy

Of course, examples like that could fill an entire page, especially if you track water use all the way back to manufacturing processes that make parts for the energy industry. But you get the picture.

The Problem with Water

So we know that water consumes energy and energy consumes water.

We also know the problems, both current and future, with energy security and supply, as they've been chronicled in these pages for years.

What may not be as obvious are the countless problems surrounding the water industry, which, if you like to live, are equally important.

So here are some of those issues.

Water systems are failing. Most water pipes in this country were laid in years following World War II, from 1945-1965, and are now past their useful life—a fact many know, but are unwilling to deal with.

It is these inferior post-War pipes—pre-War pipe were actually better quality—that are responsible for 50% of all leaks in the U.S. A huge number when you consider, though you may not believe it at first, that 20%-40% of all drinking water is lost through leaky pipes.

The aging water infrastructure is also evidence by the 300,000+ water main breaks that occur each year.

And there's more. . .

Water tables and aquifers are falling. Here are just three examples of current water table levels of three major metropolises, compared to their historical average:

Chicago/Milwaukee down 900 feet
Tuscon/Phoenix down 500 feet
Houston down 400 feet

You've also undoubtedly heard of the severe and ongoing droughts in the arid southwest and southeast—for which watering your yard only once a week is an inadequate solution, to say the least.

We're also facing drastic rises in consumption, which the U.S. has led for years. And this is where the zero sum game comes into play.

You see, China, India and Eastern Europe are host to about 2.6 billion people, or 40% of the world's population. The ongoing creation of an ever-growing middle class in those areas brings with it a massive increase in water demand.

Right now, Americans use about 158 gallons per day to take showers, flush toilets, brush their teeth and wash their clothes and dishes. This doesn't take into account the water used to make our goods and grow our food.

In developing nations, water use stands at about 13 gallons per day. But you can bet they'd like an American's share of water, and they're trying to get it.

And these numbers don't include the nearly 1.1 billion people that lack access to fresh drinking water. They too are seeking their share of the world's water.

But if we can't make water, American water use has to go down for others' to go up, right? Hence, zero sum.

Naturally, that's the $64,000. . .ahem. . . $22.6 trillion question.

Profiting from the Water Solutions

Obviously, American's aren't going to curtail their water use independently. Having a green lawn in July is much too important for that.

Nonetheless, something is going to have to be done to overhaul the way we use water. Like in energy (which some have forgotten), the first and cheapest way to do that is through efficiency.

We're seeing this through low-flow toilets and shower heads that use much less water than their predecessors. But for all their benefits, there's really no investor money in toilets.

As investors, we need to be focused on water infrastructure, which was recently given a grade of D- by the American Society of Civil Engineers. By fixing those leaky pipes that cost us 20%-40% ofour drinking water every year, it becomes less critical—though still important—to make large water-use reductions at the individual level.

To that effect, Booz Allen Hamilton, a private government consulting firm, estimates that $22.6 trillion needs to be invested in water and related infrastructure to quell a large portion of the problems.

Add to that the fact that water is undervalued by 300%-500% (just compare a gallon of Deere Park to a gallon of gas) and you're looking at an investor's dream.

Now water is a widespread business, encompassing thousands of companies in hundreds of sectors. So you'll need to weed through them until you find the profitable opportunities.

Of course, that's what I do for members of the Alternative Energy Speculator every week.

Members of that service received their first water-related stock recommendation about one month ago, and have already seen gains in excess of 10%.

And we'll have plenty more double- and triple-digit water winners to come. One stock in the Green Chip Water Index has gained 260% in 14 months.

If you want to get in on these types of water plays to compliment the already hefty profits being taken in the alternative energy markets, you should definitely check out the Alternative Energy Speculator.

In the mean time, take a look at Itron Inc. (NASDAQ: ITRI) and Veolia Envriontment (NYSE: VE)—two all-but-guaranteed winners as this water issue continues to play out.

Call it like you see it,

Nick

Clean Technologies

The Hawaiian Ribeye was absolutely delicious.

After registering for the Clean Technology 2008 conference in Boston early yesterday afternoon, I headed to a nearby restaurant to have dinner with some friends who happened to be in the area.

But despite the high-end service and even better food at what can only be described as a contemporary bistro called Houston's, it was something directly outside the restaurant that really impressed me.

Just out the front door was Faneuil Hall, a shopping center built in 1824 to support the growing city's rapid commercial development.

Perhaps foreshadowing the Big Dig, part of Boston Harbor was filled with dirt to provide land for construction of the hall. Expansion and innovation would continue in Beantown for nearly the next two centuries.

Certainly not part of the area's original construction, the grounds around Faneuil Hall are now graced with solar-powered trashcans—one of the few clean technologies I must say I'd never heard of.

Clean Technologies and The Greening of Waste

The solar powered trashcan outside Faneuil Hall is affectionately dubbed Big Belly, and is made by a company called Seahorse Power.

Big Belly is the brainchild of Jim Poss, who noticed Boston's problem of overflowing city trashcans back in 1999 during a walk around Boston Common.

Originally a developer for electric car company Selectria, Mr. Poss designed a prototype fitted with a compactor powered by a solar panel.

His first trashcan led to the formation of Massachusetts-based Seahorse Power, which began selling the cans in 2005.

There are now about 500 units in cities from Los Angeles to Chicago to New York. And why not?

Big Belly holds up to five times the amount of a typical trashcan, which reduces collection frequency, fuel consumption and the amount of space needed to store waste in landfills.

The novel can is just one way the $45 billion waste disposal industry is going green. We've also recently witnessed the conversion of trash truck fleets to clean fuel vehicles and the creation of energy from waste in the form of biomass, biogas and even cellulosic ethanol.

Incidentally, greening the waste process is also a honey hole for reaping carbon credits. And as we approach a cap-and-trade carbon emissions trading system in the U.S., companies that can make disposing of waste more clean and efficient stand to make a killing, along with the savvy investors who know about the emerging trend.

One such company is Casella Waste Systems (NASDAQ: CWST), which, beyond transforming how the waste stream works, is also guiding and investing in Seahorse Power.

The Adoption of Clean Technologies

Of course, garbage isn't the only way to capitalize on the scorching hot cleantech revolution. And as Washington State Congressman Jay Inslee disclosed in this morning's keynote address, the industry is only going to get hotter in 2009 as Congress moves to pass several bills to foster the adoption of clean technologies.

I've condensed the Congressman's speech into six reasons you need to be invested in this sector before 2009. Each is a measure he thinks will be passed in the 2009 legislative session.

6 Reasons to Invest in Clean Technologies

1. A national renewable portfolio standard (RPS) of 15% (no date provided)
2. A complete building code overhaul that will eventually improve energy efficiency in buildings by 50%
3. Net-metering laws ensuring renewable energy adopters can deliver their electricity to the grid
4. A massive increase in Federal R&D spending for clean technologies (which currently stands at 1/55 the cost of the Iraq War)
5. The domestic establishment of a European-style feed-in tariff for renewably-produced electricity, and most importantly
6. The creation of a national cap-and-trade system for carbon emissions

As Mr. Inslee noted, these are just one man's words. But he seemed fairly confident that most of the initiatives he mentioned could get through both Houses. Naturally, the results of November's election will be the determining factor in exactly how much clean energy legislation gets passed.

Ultimately, he said, the U.S. needs to reemerge as a technology leader and implementer, with reference to Germany's domination of the solar business and Denmark's successful wind industry. (Both of which are investment hotspots for cleantech, whether in Vestas (CPH: VWS), Q-Cells (FRA: QCE), SolarWorld (FRA: SWV) or the numerous other success stories.)

And the need for rapid advancement in clean technology isn't just about rising temperatures or emissions, it's also about dollars.

China, as you know, is developing quite rapidly. And they're trying to do it, albeit with a few glitches, in a somewhat sustainable fashion.

To conclude, Inslee suggested that the U.S. be the ones selling billions of dollars worth of clean technology products to China, rather than having them come from Europe. You can get a piece of that pie too.

In addition to Clean Technology 2008, I'll also be attending the Renewable Energy Finance Forum later this month.

Information gathered at both events will ultimately culminate in profits as I learn which companies will have an edge going into 2009.

These events always offer insights that can't be attained behind a desk. In fact, it was at the Alternative Fuels and Vehicles conference in early 2007 where I learned about the lucrative opportunity of "Clean Air Cashouts." You may want to check it out.

Call it like you see it,

Nick