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Strong Connection Between Economy & Environment – Investors Taking Action

Many of the world’s leading executives and investors believe in a strong connection between the economy and the environment. Talk of a “political battle” between the two major focal areas is mere “nonsense,” says Mark Vachon, Vice President of GE’s Ecomagination program.

In a recent interview, Vachon shot down the “false dichotomy” that some are trying to present between attaining profits and respecting our planet.  “There’s this theory that you have to pick one: economics or environmental performance.  That’s nonsense.  Innovation is the way you can have both.”

Over $5 billion has been invested in renewable energy, efficiency and smart grid technologies as part of GE’s Ecomagination program.  By 2015, GE plans to double investments in the sector to $10 billion.  These investments have paid off handsomely, noted Vachon.  With $85 billion in revenue, GE’s cleantech investments have doubled the performance of the rest of its portfolio.

“Companies that don’t get this, really risk becoming irrelevant to the marketplace. Whether you believe it for climate change or just the markets that are developing, it is our responsibility as businesses to be responsible to the design  signal that the world is telling us.”

The trend is undeniable.  Investments in clean energy and related technologies are accelerating. In 2011, investments in clean energy trumped those in fossil fuels for the first time.  In total, $260 billion was funneled into the clean energy sector.  Since 2004, cumulative investment numbers over $1 trillion dollars.

Based on our current path, Bloomberg New Energy Finance predicts $400 billion will be invested annually in proven renewable energy technologies such as solar PV, solar thermal, wind energy and geothermal by 2020.  Many sophisticated investors view clean energy as one of the greatest wealth creation opportunities in history.

For more information on how we invest in clean energy, please visit us here.

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Sinopec & Total to Invest $4.5 Billion in U.S. Natural Gas

Booming natural gas resources in the United States have attracted significant investment from major foreign energy players in Asia and Europe.

China’s China Petroleum & Chemical Corp (Sinopec) and France’s energy giant Total SA recently announced new investments totaling $4.5 billion to take advantage of as of yet undeveloped shale rock formations in Alabama, Mississippi, Colorado, Ohio and the Michigan Basin.

In its first entrance into the U.S. natural gas industry, Sinopec will partner with Devon Energy Corporation in  a $2.2 billion joint venture to develop five fields.

Total cemented a $2.3 billion agreement with Chesapeake Energy Corporation to develop the Utica gas field in Ohio, which studies indicate is rich in liquids such as butane, propane and ethane as well as natural gas.

At under $3 per million BTUs, U.S. natural gas prices are at their lowest in over two years.  As a result, shale formations with high concentration of liquids, such as the Utica field, are attractive to investors because prices of extracted liquids are linked with crude oil, rather than natural gas.

Additional interest in U.S. natural gas has been seen from Norway’s Statoil ASA and India’s Reliance Industries Ltd., indicating that global energy conglomerates are seeking to add “unconventional” fossil fuel resources to their portfolios and are willing to spend big money to do so.

The explosive growth in North American natural gas resources is one of today’s key energy trends.  For more information, click here to read more of our posts on natural gas.

Read the full article here…

 

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In China, forthcoming levy of resources tax on crude oil, natural gas, coking coal and rare earths offset the positive sentiment from the purchase of state bank shares by China’s sovereign wealth fund (Central Huijin).  China will rollout national wide resource tax from November 1st with the aim of shifting profits from companies to government in poor and resource rich provinces as well as providing incentives for companies to fully utilise existing mines.  Chinese coal names were under pressure after the news.  However in our view, coking coal is a scarce type of coal in China, it should be easy to pass the increased tax to downstream users.  Another implication is that rising domestic price could encourage imports.  However, as RMB20/t is only 1-2% of coking coal prices, we believe demand impact should be relatively limited.

China also featured in the modest downgrade to oil demand growth in the OPEC Oil Market Report published yesterday. According to OPEC, there are three factors that could negatively impact Chinese oil demand growth: (1) China has removed incentives that have pushed new car registrations up for the past few years; (2) Higher retail petroleum prices slightly suppressed oil demand, mainly transport fuel, in the past three months; and (3) the mandatory blend of biofuels has reduced gasoline consumption slightly.

OPEC and the IEA believe China’s oil demand should grow by 5% in 2012, or by 0.5mmb/d, slightly below the historic trend, that would put 2012 demand growth closer to 0.6mmb/d- a figure more in line with IEA’s view last month.

Read the IEA’s latest report “Energy for All: Financing access for the poor

 

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Energy & Water – "The Real Blue Chips"

The latest Energy Bulletin from the Post Carbon Institute discusses “Energy and water – the real blue-chips” and important implications for investors:

“The two most important natural resources are water and energy.”

“In most cases, each is required to procure the other.  First, we use water directly through hydroelectric power generation at major dams, indirectly as a coolant for thermoelectric power plants, and as an input for the production of biofuels.”

“By sector, the two largest consumers of water in the United States are agriculture and electrical power plants.  If we count only fresh water, fully 81% of U.S. use is for crop irrigation.”

“For American corn production, an average of 2,100 gallons of irrigation water is required per bushel which yields 2.7 gallons of corn-based ethanol.  This means that 206 gallons of water is needed per gallon of gasoline substitute, ethanol, before refining.”

“Several studies suggest that up to two-thirds of the global population could experience water scarcity by 2050.  The shortages will be driven by the agricultural sector, which is currently responsible for up to 90% of global fresh-water consumption.

“Water shortages could become much more acute if there is widespread adoption of energy-production technologies that require water as a significant input, such as biofuels.”

“If large quantities of water are diverted to energy production because the market dictates this as society’s priority, there would be a significant loss of food production and a decline in human welfare.”

According to data from the Institute, the water requirements for energy production are substantial. Conventional petroleum extraction requires 10-40 liters of water per megawatt hour of energy, oil refining can demand 80-150 liters of water, and enhanced oil recovery can require a staggering 7600 liters of water per megawatt hour.

Coal integrated gasification, closed loop nuclear cooling processes and natural gas combined cycle plants can require upwards of 20,000 liters of water per megawatt hour.  The production of ethanol from irrigated corn can demand between 2 and 8 million liters of water!

Energy and water resources are tightly integrated.  It is impossible to have one without the other.  Water and energy demand is rising, yet reserves are dwindling, resulting in resource stress and an exciting opportunity set for investors.

Read more about investing in water and natural resources

 

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LNG Demand Reaches New Highs in China & Japan

The month of June saw dramatically increased demand for liquefied natural gas (LNG) in both China and Japan.

Japan, still reeling from the Fukushima nuclear crisis, has a serious power deficit as a result of nuclear reactors damaged during the earthquake or taken offline for safety reviews.  Prior to March of this year, nuclear power formerly supplied 30% of all Japanese energy.

Japan was already the world’s leading LNG importer, but since the spring its imports have risen higher.  Current import levels rose 10.6% year on year during June, the third straight month of increases.

LNG has been used as an important fuel substitute for nuclear power.  Industry experts say in the event of total nuclear closure, 20 additional tons of LNG would be tacked on to yearly Japanese demand, which last year reached 70 million tons.

However, Japan may find some resource competition coming from its neighbor China.  Industrial power demands have grown, prompting additional LNG imports.  In June, imports were 4.3% higher than the previous high in December 2010, when the nation imported 1.03 million tons to meet winter heating needs.

PetroChina has opened a new LNG receiving terminal in the eastern province of Jiangsu and expects increase gas imports to help ease power shortages in some provinces.  Tony Regan, analyst for Tri-Zen International remarks “we might be seeing this great leap forward in the [Chinese] gas market.”

Chinese import levels are predicted to rise to 13 million tons in 2011 from 9.3 million in 2010.  By the end of the decade, China will likely surpass South Korea to become the world’s second largest LNG importer.

Read more here…

 
 

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Clean Energy Could Add $155 Billion a Year to U.S. Economy: Google

The United States stands to reap significant economic gains from breakthroughs in clean energy, according to a new analysis from Google.  The internet search giant has been a strong supporter of renewable energy, with notable stakes in solar, smart grids and wind farms around the globe.

Google.org, the company’s philanthropic arm, says with dedicated focus to clean energy, grid infrastructure, energy storage, natural gas and electric vehicles, the U.S. could add $155 billion a year to the economy and create over 1.1 million jobs by 2030.  Adoption of new energy technologies and energy efficiency measures could result in 13% reduction in greenhouse gas emissions.

The report warns there is no time to waste.  Based on Google’s models, a five year delay in implementing a clean energy agenda could cost the U.S. economy up to $3.2 trillion in unrealized gains, and 1.4 net jobs.

Read Google’s analysis on its company blog here

 

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2010 Energy Consumption Reaches New Peak: BP Statistical Review of World Energy

“The world consumed more energy in 2010 than ever before.”- BP Statistical Review of World Energy 2011

According to BP’s annual energy report, global energy consumption in 2010 reached a new all time high.

The report’s key findings corroborate our long-standing thesis – population growth, increased industrialization and urbanization combined with dwindling resources is propelling energy demand to unsustainable levels. We are seeing, and will continue to see dramatic changes to the global energy dynamic as the world struggles to meet this new energy demand.

Some key points from the BP report are noted below:

  • World primary energy consumption increased 5.6% in 2010 – the largest increase (in percentage terms) since 1973.
  • Chinese energy consumption grew by 11.2%.  China now accounts for 20.3% –  over one-fifth – of the world’s energy consumption.
  • As of 2010, China has surpassed the United States as the world’s largest consumer of energy.
  • Oil is still the world’s leading source of fuel, and supplies 33.6% of all energy consumption.  However, oil has been losing market share year over year for the past 11 years.

To read the full report, please click here

 
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Posted by on June 15, 2011 in Oil

 

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