Obama Budget Proposes Big Increases for Spending on Clean Energy

Photo courtesy of KMBC.com

Photo courtesy of KMBC.com

President Barack Obama’s fiscal year 2014 budget proposal made headlines this week mainly for its changes to Social Security, but the increases proposed in US government support for clean energy spending did not go unnoticed. Reuters News Service called the increases for electric cars, wind power and other green technology “dramatic,” particularly because they arrive in the face of Republican criticism.

While many government agencies get slimmed down in the budget proposal, the Department of Energy would get an 8 percent increase to $28.4 billion next year, Reuters reported. Included are a 75 percent increase in spending on advanced vehicles to $575 million and a 29 percent increase in spending on the ongoing effort to integrate solar and wind power into the national electric grid, Reuters reported. Support for biofuels would increase by 24 percent.

“These increases in funding are significant and a testament to the importance of clean energy and innovation to the country’s economic future,” the Obama administration wrote in the budget proposal, according to the Reuters report.

While Republicans have criticized the US backing of companies like Solyndra, a solar panel maker that went bankrupt, and Fisker Automotive, a hybrid sports care maker which is struggling and laying off employees to hold off bankruptcy, President Obama has maintained that clean energy is a key to the country’s future.

Government support for the clean energy industry “has nearly doubled (the US) energy generation from wind, solar, geothermal and other renewable energy sources” since Obama took office in 2008 and maintaining this level of support “could lead to breakthroughs in the years to come,” Reuters reported.

We’ve been following several wind and solar energy companies, including:

Newbury Park, CA-based Sauer Energy (OTC: SENY, http://www.sauerenergy.com/) is a development stage company developing vertical axis wind turbines for commercial and residential uses. Formerly BCO Hydrocarbon Ltd., the company disposed of its oil and gas interests and in July 2010 purchased Sauer Energy and in May 2012 purchased Helix Wind Corp. Back on Dec. 24 it was trading for $0.24. It closed April 12 at $0.10, down 1 cent for the day. Its market cap is now $9 million and 52-week range is $0.08-$0.39.

China-based China Ming Yang Wind Power Group (NYSE: MY, http://www.mywind.com.cn/) is a wind turbine manufacturer focused on designing, manufacturing, selling and servicing megawatt-class wind turbines. Last July, MY announced it was considering a joint venture with China-based Huaneng Renewables Corp. to develop wind power and solar power projects in China and overseas markets. MY stock closed Dec. 24 at $1.21. It closed April 12 at $1.35, up 1 cent for the day. Its market cap is now $169 million and 52-week trading range is $1.06-$2.47.

Chatsworth, CA-based Capstone Turbine Co. (Nasdaq: CPST, http://www.capstoneturbine.com/) develops and markets microturbine technologies, including technologies used to provide on-site power generation for wind power. It closed Dec. 24 at $0.91 with a market cap of $278 million.CPST closed April 12 at $0.93, down 4 cents for the day. Its market cap is now 282 million and 52-week trading range is $0.73-$1.20.

San Mateo, CA-based SolarCity Corp. (Nasdaq: SCTY, http://www.solarcity.com) designs, installs and sells or leases solar energy systems to residential and commercial customers, as well as electric vehicle charging products.  It closed March 15 at $16.74 with a market cap of $406.5 million. SCTY closed April 12 at $19.97, down 41 cents for the day. Its market cap is now $1.5 billion and 52-week trading range is $9.20-$21.40.

Ontario, Canada-based Canadian Solar (Nasdaq: CSIQ, http://www.canadian-solar.com/ ), which sells a variety of solar products, closed back on March 15 at $3.50 with a market cap of $151 million. It closed April 12 at $4.07, down 3 cents with a market cap of $176 million. Its 52-week trading range is $1.95-$5.15.

San Jose, CA-based SunPower Corp. (Nasdaq: SPWR, http://www.sunpowercorp.com/), which makes a wide variety of solar products and systems, closed back on March 15 at $11.80 with a market cap of $1.4 billion. SPWR closed April 12 at $11.06, up one cent for the day. Its market cap is now $1.8 billion and its 52-week trading range is $3.71-$13.88.

China-based Trina Solar Ltd. (NYSE: TSL, http://www.trinasolar.com/) designs, manufactures and sells photovoltaic modules worldwide. Back on March 15, TSL closed at $4.11 with a market cap of $291 million. It closed April 12 at $4.19, up one cent, with a  market cap of $335 million. Its 52-week trading range is now $2.04-$7.99. 

China-based Yingli Green Energy Holding Co. (NYSE: YGE, http://www.yinglisolar.com/) makes photovoltaic products including cells, modules and systems. YGE closed back on March 15 at $2.47 with a market cap of $387 million. It closed April 12 at $2.12, down 5 cents, with a market cap of $324 million. Its 52-week trading range is $1.25-$4.12.

China-based Suntech Power Holdings (NYSE: STP, http://am.suntech-power.com), the world’s largest producer of solar panels, closed at $0.70 back on March 15 with a market cap of $127 million. It closed April 12 at $ 2012, and then rose to $1.87 in early January, but has been falling since. STP closed March 15 at $0.75, udown 12 cents for the day, with a market cap of $135 million. Its 52-week trading range is $0.30-$2.96.

St. Peters, MO-based MEMC Electronic Materials (NYSE:WFR, http://www.memc.com) manufactures and sells silicon wafers and photovoltaic materials. Through SunEdison, it’s a developer of solar energy products. It closed March 15 at $4.53 with a market cap of $1 billion. WFR closed April 12 at $4.76, down 6 cents, with a market cap of $1 billion. Its 52-week trading range is $1.44-$5.70.

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What, When Is Payoff for ‘Green Crude?’

For scientists and botanists, algae are among the world’s most basic organisms. Most species are tiny, energetic photosynthesis machines. For investors, algae, and the companies trying to harness its powers and potential, present a range of possibilities. “Algae are fascinating,” said Peter Park, an analyst with Park West Asset Management who is closely watching the progress of small companies focused on commercially farming algae for use as a biofuel. The big question about algae for investors remains: how good are the new technologies and how far away is the payoff?

The big company names like Exxon, Chevron and Sapphire Energy, to name a few, have taken an interest in algae, sometimes called “green crude” for its promise as an energy producer. But these companies are primarily investing in “open pond systems” for producing algae that have limited yields. It is the few, tiny, development stage companies that are doing the most interesting, albeit mostly untested, thinking on the potential of algae as a source of alternative energy.

Los Angeles-based OriginOil Inc. (OOIL.OB, http://www.originoil.com/ is attempting to patent a technology called Quantum Fracturing that increases CO2 absorption in the algae, allowing the cell to produce a greater volume of hydrocarbons. The company, which was recently named one of the 30 companies with “transformative technologies Biofuels Digest, hopes to ultimately license the technology to refiners and others and announced its first customer, Australia-based MBD Energy, in May. The stock trades relatively well (average daily volume is more than 183,000 shares) but its price is languishing at around $0.25, off its $52-week high of $0.40.

Scottsdale, AZ-based PetroSun Inc. (PSUD.PK, http://www.petrosuninc.com), formerly PetroSun Drilling, is focused on production of biodiesel because “it can be used in existing diesel engines, which relieves manufacturers from making costly engine modifications,” according to the company website, as well as the fact that it can be mixed with conventional petroleum diesel. But the stock has plummeted down to rock bottom $0.03 and is not trading.

U.S. and Perth, Australia-based *Algae.Tec Ltd (http://algaetec.com.au) is focused on a unique algae production system to produce algae for the production of biofuels and animal feed, among several other uses. The company, which has an algae development center just north of Atlanta, has created a technology called the McConchie-Stroud System (after two of the founders) that uses a 40-foot shipping container as a totally controlled environment to promote photosynthesis and drive algae production 10 times greater than an open pond system. These containers are stackable and mobile and can be situated virtually anywhere. The Company has just released its prospectus and plans to go public on the Australian Stock Exchange (ASX) sometime this summer and have a demonstration container operational by February 2011. 

Melbourne, FL-based PetroAlgae (PALG.OB, http://www.petroalgae.com) licenses a commercial, open pond “micro-crop” technology system that enables the production of green diesel as a renewable fuel as well as protein for animal feed and human supplement. The renewable fuel component is functionally identical to traditional petroleum products (diesel, jet fuel, gasoline) and can be “dropped into” existing petroleum distribution channels. Its stock price has bounced between $6-$40 over the past year (it went public at $3 a share in 2008) but trades only sporadically and has been hit hard in the recent market downturn.

* Denotes Allen & Caron client.

How You Gonna Keep ‘Em Down on the Farm?

Want to get a peak at some up-and-coming green technologies that are REALLY close to the land? Head to an agricultural conference. The worlds’ largest annual farm conflab – the World Ag Expo (http://www.worldagexpo.com/)  – just wrapped up in Tulare CA, and featured the world’s first “Cow Power” truck along with hosts of solar, geothermal and biofuel vendors. http://www.istockanalyst.com/article/viewiStockNews/articleid/3034905

Farmers GET the green movement and farms are in many ways at the epicenter of renewable energy. They have the space to house wind farms and the wastes to supply the market for biofuels and cellulosic ethanol.   For the ingenuity of a single farmer, look at this article on KY’s Danny Kluthe:  http://www.thepigsite.com/swinenews/20403/harnessing-the-power-of-pig-manure. And though corn-based ethanol stocks have been crushed by market forces (not to mention a public backlash based on supposedly higher food costs) “cellulosic” ethanol may be hitting its stride. http://features.csmonitor.com/environment/2009/02/13/the-%E2%80%98holy-grail%E2%80%99-of-biofuels-now-in-sight/

Cellulosic ethanol is produced from wood, grasses, and the non-food parts of plants like the stalks of corn plants after harvesting.  Edible corn continues to comprise the bulk of ethanol projects in the US, where the easier-to-use sugar cane is not practical for weather reasons, but both the growth rate and the economic rationale is stronger for cellulosic. Irvine-based BlueFire Ethanols (EBB: BFRE, http://www.bluefireethanol.com/) converts these and other “agricultural residues” (a nicer term for cow poop you will not find) into ethanol. In December it announced a plan to design a plant in South Korea. It has a $21M market cap and trades at $0.75, off of its 52-week high of $4.50.

Aptly named Tarrytown NY-based Environmental Power Corporation (Nasdaq: EPG, http://www.environmentalpower.com/) develops renewable natural gas (RNG® ) from manure and other agriculture wastes. It has a deal to supply west coast utility PG&E with up to 8,000 MMBtu worth of it daily from its Stephenville, TX plant, the largest renewable natural gas plant in North America, if not the world. The stock has volume of around 100K shares a day and trades, at $0.39, near its 52-week low and well down from a high of $5.62.

Tulsa-based Syntroleum (Nasdaq: SYNM, http://www.syntroleum.com/main.aspx) has a joint venture with AR-based poultry giant, Tyson Foods, that will convert chicken grease into renewable diesel and jet fuel. Construction of the plant began last week, http://biz.yahoo.com/pz/090112/157534.html. Prior delays, which are almost inevitable with a project of this scale, have seemed to dampen much of the investor enthusiasm the announcement generated for the stock when the project was first announced. It trades at $0.80, above its 52-week low of $.43 cents and well off its high of $2.86.

 The current climate is not kind to these capital-intensive companies because credit is tight at a time when the economic imperative to invest in alternative fuel is less than it was when oil was $145 a barrel. But in a matter of time farmers may look to these types of technologies to help them do well by doing good.