Pop quiz.  Looking forward 10 years, if you had to choose between two groups - Group 1: Investment bankers and GWB or Group 2: The NRDC and WWF - to guess which group’s actions will have had bigger positive impact on the course of environmental policy, cleantech and green living over that time - which group would you choose?  If you chose Group 2 - then you obviously don’t know a trick question when you see one.

I am dead serious…  this is not hyperbole.  I believe that when we look back 10 years from now we will see that the actions of the Bush Administration and Investment Bankers peddling mortgage backed securitized junk will have done more to help the cause of the green movement than armies of advocates, lawyers, non-profiteers, and career environmentalists have been able to do in decades of earnest, often unappreciated, toil in the name of the greater good.

That the result of Group 1’s actions in this instance were entirely unintentional side-effects of other more self-serving goals totally unrelated to the environment is irrelevant - results are what count.  And without these guys its highly unlikely that we would have the perfect storm of conditions that exist today allowing the fundemental systemic changes necessary for things such as alternative energy and other cleantech technologies to take root.

Ok, so what am I really talking about?  Well, if the bankers and Bush’s administration hadn’t hosed up the economy so badly (which at the core was a consumer driven growth cycle fueled by the housing boom that led to the financial crisis which …

I came across this piece at MIT Technology Review that highlighted how battery technology companies are poised to reap significant benefits of the federal stimulus package.  Obviously this is part and parcel with the scrambling going on to save the U.S. auto manufacturing industry (oh… if it were just that simple).  The bigger question is - why exactly is this a good bet?

Don’t get me wrong - I am all for breakthroughs in battery technology and energy storage.  Particularly for use in managing the power grid, but I think its telling that while funding for cleantech and green ideas has been exploding, capital has been somewhat slow to flow into battery technologies - which should be a warning sign to the government check signers.

I think part of the problem is highlighted right in the MIT piece - despite its rah rah tone.  Are there really these “economies of scale” that are touted out there for battery technologies?

Battery manufacturing is largely automated, so labor costs aren’t much of a concern, he says. Rather, the battery industry developed in Asia because countries there, particularly Japan, developed portable electronics and hybrid vehicles, creating a market for batteries.

Well if battery labor costs aren’t a concern in the battery construction process due to automation - then how exactly will increased manufacturing volume result in the 10x economy of scale that one will need to make batteries cost effective for autos?  Certainly there are some administrative and R&D costs that can be amortized across larger …

After raising long term crude oil price projections by 100% last week, the IEA lowered its 2009 per barrel projection for crude oil by nearly 30% yesterday.  Its not an enviable job to sort out the variables that go into oil price projections - but given the magnitude of the revisions we are seeing in these projections I have to wonder how effective the projection models are in dealing with the volatility that the market is showing?  What good model that results in a projection that changes by 30 to 100% on a yearly basis?  I have no idea as to how much this impacts the volatility of oil prices - but it can’t help.

Its evident that the current projection models are getting whipsawed by the changing economic projections as we have seen the global recession spread - but the conditions to ignite the recession have been in place for some time - so one has to wonder where the oil pricing models (particularly the long term ones) are missing the boat.

This volatility is not only causing trouble with the projections used by many to hedge oil bets, etc.  But its wrecking havoc with long term oil production planning as well.  Ideas that seemed good just 6 months ago are now getting shelved as prices and projections of prices are falling. 

Private oil companies are already reining in plans for investment-heavy expansion, in part because falling prices no longer justify the extra output, in part as a punt on further declines in project …

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BP and Berkeley (and the DOE) have teamed up to pour $500MM into research for biofuels.  There was a fluff piece on NPR today about that effort.  While on the surface it might be considered admirable that a big oil company would invest in our research of alternative fuel technologies - when you peel back the onion and really look at the deal - its a big giveaway to big oil wrapped in a public relations friendly package.  Basically they get all of the important benefits of private investment from research on this topic but have it subsidized by public monies.  As a Californian and taxpayer I really have to question the wisdom and equity of essentially giving taxpayer dollars to a private corporation in order to monopolize a public insitution on this topic - not to mention providing them a sweetheart deal to monetize any fruits of that research at our cost.  Research institutions exist to do research - when funded by public monies those efforts should be public available information.  Does a $500MM grant really offset what the State of California is giving BP in terms of access, infrastructure, prestige, etc.?

This deal is rife with problems.  BP has defacto control over the research agenda on both the public and private side of the lab.  BP gets to use the inventions created through this research free of charge.  Most concerning is that BP will be able to use its position to block usage of inventions coming out of lab staff (public employees I remind you) …

While oil prices continue to fall on weakening economic data the International Energy Agency (IEA) has doubled its long term estimate for oil prices to over $200 from $108 last year.  They also boosted the amount of projected investment necessary to serve global energy demand over the time frame by about 18% from $22 Trillion to $26 Trillion.  At the same time they cut long term demand from 116MM barrels a day in 2030 (up from 85MM barrels today) to 106mm barrels.

I find it pretty comical that in one year the IEA model has projected a 100% increase in its long term price fo oil - mostly attributed to lower economic demand over the same period as was projected in last year’s World Energy Outlook.  As someone that used to be required to project things for a living it really makes me wonder about the IEA projection model  - is the model that sensitive to changes in economic inputs?  Or has the world economic outlook for the U.S., Europe, which are still the largest oil users - and will be for the forseeable future - that much more dire than 12 months ago given a 22 year tail?  And this spike in price comes despite cutting global demand for oil by about 10%. 

This is a problem that a lot of long term models have - which is probably why oil traders ignored this news - sensitivity  to small changes in early year inputs is so high in the out years that the resulting answers are pretty useless.  The primary reason …

Lost in the hoopla about renewed calls to drill ANWAR is the fact that there is a shortage of oil rigs, ships and other assorted resources to extract that oil even if it were enough to make a difference in our gas prices….

As President Bush calls for repealing a ban on drilling off most of the coast of the United States, a shortage of ships used for deep-water offshore drilling promises to impede any rapid turnaround in oil exploration and supply.

What is striking is that this is yet another economic reason to wean ourselves from oil ASAP - more of our dollars headed overseas to enrich other nations to support our energy habit.  When South Korean companies are putting $100 MM premiums on deepwater drilling ships - that shows up in our cost of energy - further strengthening the viscious cycle of deficit spending with regard to oil… This isn’t moving deck chairs around on the Titanic folks, this is selling the lifeboats to buy ice cubes…

Today’s cool charts come courtsey of GE. Now, its from GE so they have a vested interest, but today they released a powerpoint with some interesting datapoints regarding wind project impact on tax revenues and investment. GE claims subsized wind projects have a positive net return for the U.S. treasury over their lifetime. The argument is when you add up the various federal taxes associated with the economic activity of building a wind project and then operating that project over time, the Net Present Value (NPV) of that project with regard to taxes generated for the federal treasury is positive even after paying out a hefty federal tax subsidy up front.

There are no details on the NPV calculation so its hard to see exactly what assumptions go into this claim, i.e., what is the terminal value of the windfarm in year 10 (I assume its a 10 year DCF) given that the lifespan of a windfarm is well in excess of that. If true its the definition of a project that is revenue neutral from a tax standpoint.  Apparently, it doesn’t include local or state tax revenues in the projections either (or subsidies for that matter).

The second interesting chart is that was in the presentation was this one:

Which shows the …

Yet another reason why the government is currently failing consumers with its Strategic Petroleum Reserve policy, and why investors in green stocks should tread carefully at current prices. This Forbe’s article outlines how Opec’s president has made the argument that speculators are driving the current high prices for oil. And in all fairness he has a point.

Whether you look at year over year data, or at data since October when oil breached $70 there is little evidence to support the current spiraling of oil prices. U.S. consumption is down, global consumption is flat after spiking in the fall of last year, and OPEC and total world production is up 2MM barrels a day. Inventories are down, reflecting the non-US consumption spike in the fall. Assuming that the pre-October pricing was status quo (a big if) that would portend for lower prices sometime in the future (hard to say when though).

It also is a really good argument as to why the mismanagement of the Strategic Petroleum Reserve is a big deal. If the federal government wanted to take the air of the market and shut down the speculators it could do so easily by a.) suspending the stockpiling of oil for the SPR during this period of high marginal pressure on oil prices; b.) release a small portion of the oil into the market. Since the marginal price per barrel is so sensitive to supply and demand change right now these two simple steps would go a long …