Aspire Week in Review - Week Ended December 19, 2008

Dec 19, 2008
Author: Administrator

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The U.S. Department of Energy said this week it is anticipating basically no growth in U.S. oil consumption through 2030, but strong growth in the alt energy sectors:

• Efficiency policies and higher energy prices will result in a slowdown in U.S. energy consumption growth;
• Increases in renewable energy consumption and reduction in coal-fire conventional plant additions will result in a slowdown of energy-related GHG growth; 
• Expectations for CO2 emissions growth through 2030 are 0.3% per year, down from the 2008 reference case; 
• Total consumption of marketed renewable fuels will growth by 3.3% per year; 
• Hybrid vehicle sales will increase from 2% of new light-duty vehicle sales in 2007 to 38% in 2030; 
• Sales of PHEVs grow to 90,000 vehicles annually by 2014 and account for 2% of new light vehicle sales by 2030; 
• Ethanol use for gasoline blending grows to 12.2 billion gallons and E85 consumption to 17.3 billion gallons in 2030; 
• The ethanol supply from cellulosic feedstocks reaches 12.6 billion gallons; 
• Biodiesel and biomass-to-liquid diesel fuel use increases to almost 2 billion gallons and 5 billion gallons, respectively, by 2030.

In another forecast, Think Equity's David Woodburn conducted a survey which concludes that cellulosic targeted volumes based on the Renewable Fuel Standard mandates by 2010 through 2012 is "unlikely." Woodburn projects a massive production shortfall in 2010 with only 28.5 million gallons coming online, as opposed to the 100 million gallons mandated. The good news is that by 2011,

Woodburn expects total cellulosic biofuel volume to reach 246.7 million gallons, much closer to the RFS mandate of 250 million gallons.

Alt Energy and Clean Tech Markets
2008 Year in Review and Looking Forward to 2009

Exiting 2008 and looking forward to 2009, we are reaching out to several of the alternative energy and clean tech industry's leading experts and executives to provide us with insight into developments in key sectors, as well as a sense of where things are heading. We received such a strong response from those we asked to participate that we have broken up our interviews into a series.

This week, we focused on geothermal with Brent Cook, CEO of Raser Technologies (NYSE:RZ) and Curt Robinson, Executive Director of the Geothermal Resources Council, and on wind with Randall Swisher, Executive Director of the American Wind Energy Association.

Aspire: What surprised you about the renewable energy/clean tech markets in 2008? Were there any significant developments (political, technological, consumer-driven and/or industry-driven) that occurred which you weren't anticipating? Please briefly explain.

Cook:  How strong the markets continued to be for producers in spite of market turmoil. Also surprising was how lethargic and delayed congressional reaction was in passing the PTC despite a clear energy crisis.

Robinson: This has been an interesting year for geothermal energy. Interest in this reliable, sustainable, and renewable form of energy has increased significantly and I am optimistic about the future. Attendance at the Geothermal Resources Council's Annual Meeting in October 2008 was up 45% from 2007 and up by 83%% from 2006.The twists and turns in the global economy have clouded the waters ... it appears that nationally there is the will to begin investing in renewable energy, but the capital markets have become wary and great uncertainty abounds.

Swisher: Wind has been growing at such an explosive pace these last several years that I don't think 2008's record numbers are a big surprise, but they are notable.  This year, we expect about 7,500 megawatts of new wind capacity to be built in the U.S. which will make 2008 another year of 45% growth for the wind industry.
As this growth has occurred, we've seen an increasing need to expand the supply chain for wind, including domestic manufacturing capacity.  This year, AWEA made a conscious effort to encourage new growth in this segment of the industry, with a special session at our WINDPOWER 2008 conference & exhibition and two sold-out supply chain workshops.  It's worth noting that WINDPOWER 2008 attracted 13,000 attendees and 776 exhibitors from all links in the supply chain.  With this level of interest in the industry, we expect that more and more companies here in the U.S. will be moving into the dynamic wind energy market.

Aspire: Obama's administration has set a target of 10% of electricity coming from renewable sources by 2012, and 25% by 2025.  Do you think the 10% target is realistic by 2012 given the current global financial crisis?  

Cook: Yes, it is an achievable target but should include all utility providers regardless of size or type.

Robinson: It all depends how you count the numbers ... if hydropower is included, yes. If excluded, possibly. Since there is great uncertainty, the future for renewable energy is bright ... but not clear.

Swisher: A national renewable electricity standard is important for several reasons.  It signals a long-term, national commitment to clean energy and would streamline the uneven patchwork of RES policies that currently exists among the states, spreading the benefits of renewable energy to all parts of the country.  AWEA supports a 25% by 2025 RES.  An aggressive near-term target - like the 10% by 2012 in the Obama-Biden New Energy for America plan - is feasible, and essential to ensuring the rapid deployment of renewables with the end goal in mind.  

Aspire: And where do you see the biggest contribution to reaching this target in terms of renewable energy sources?

Cook: Geothermal will clearly be a major producer once serious targets are established. There is a renaissance occurring now, but it will elevate as the targets are established. The South and other regions will have to adopt "fair" rules to acknowledge early adopters vs South region.

Robinson: The low hanging fruit ... which means that some renewables have shorter developmental timelines than others. In short, it is obvious that the US needs to have a diversified energy portfolio to be successful over the long term.

Swisher: Wind is capable of providing at least 20% of our electricity supply by 2030 using existing technology.  The U.S. Department of Energy has analyzed the challenges and benefits of achieving the 20% wind vision in a report, 20% Wind Energy by 2030, which you can view at www.20percentwind.org. 

Achieving this vision will depend upon two primary things: 

1. stable, long-term federal policy, such as a national renewable electricity standard of 25% by 2025 and a long-term extension of the production tax credit; also, in the face of the current financial crisis, the effectiveness of the production tax credit will be preserved by making it available on a refundable basis; and

2. Federal policies that encourage investments in transmission infrastructure - a Green Energy Superhighway that will connect our abundant remote renewable resources with our population centers.

AWEA's policy recommendations can be found at www.NewWindAgenda.org.

Geothermal

Geothermal energy production costs about 5.5 to 0.10 cents per kWh. On this basis, and in light of the fact that geothermal is base-load power, it can compete with fossil-fuel energy sources. Yet growth has been pretty modest. Nameplate capacity for geothermal increased only by 3.7% from 2006 to 2007, while geothermal production and consumption actually decreased for the first eight months this year by about 0.8% over the same period in 2007.

Aspire: What do you think the key reasons for the sluggish growth of geothermal are?
 
Cook: Indecisive incentives (PTC) with continued low priority to address transmission hassles. There will clearly be supply once serious demand and priority access to transmission is made possible.

Robinson: Developmental timelines ... leasing land, permitting, and building out the site. Geothermal energy is well-suited to incremental development and in uncertain times, it seems to me that the capital markets are desirous of shorter-term sure things. I think that with the currently global financial situation that there are very few short-term sure things, and therefore, I do believe that investors will warm up to geothermal energy as a solid, long-term strategic investment.

Aspire: What are the key challenges to getting geothermal on a faster growth track in terms of production and consumption in the U.S.?

Cook: Stable policy making and transmission access

Robinson: Shortening those developmental timelines and extending the production tax credit to incentivize investment. It seems to me that with the new discussions about capital infrastructure investment by the Obama administration that opportunities abound for this industry to flourish in the coming years. Federal, state, and local governments will need to be more sympathetic and responsive to the needs of geothermal developers and investors. Finally, there can be opportunities for public-private partnerships to stimulate geothermal research, development, and deployment in the coming years.

Aspire: What do you think the Obama administration's energy plan has for geothermal, in particular? What do you expect?

Cooke: National RPS standard and longer term PTC and Refundable PTC legislation. Serious thought should be given to making drilling capital available to geothermal

Robinson: I was heartened to hear Obama mention geothermal during the 2008 campaign. No one currently knows what his plan is or who his Energy Secretary will be ... I suspect that the new energy secretary, if Steven Chu from Lawrence Berkeley National Laboratory is confirmed, will be sympathetic to geothermal development and will be an advocate for geothermal research and development.

Aspire: What factors do you think will help drive growth?

Cook: Access to capital; it is clearly the single largest deterrent.

Aspire: The Geothermal Energy Association reported that, as of August, there was 2,957.6MW of geothermal power capacity online in the U.S., and that there was another 3,959.7MW of new activity identified (in Phase 1 through Phase 4). The 2006 Geothermal Task Force Report said that there could be an additional 18,146MW online by 2025. Heading into 2009, in the midst of the current economic environment, do you think these targets are still achievable?

Cook: Yes, but only if capital markets function

Robinson: Yes, those numbers seem reasonable ... and we have ample time to develop those resources by 2025. The question persists about how aggressive and sympathetic the administration and energy secretary will be to geothermal development."

Aspire: Do you think there is any less urgency to ramp geothermal production in light of the pullback in oil prices? Why do you think the media and so much of Wall Street has so closely correlated the relationship between oil prices and alternative energy demand? Is it a mistake to do so?

Cook: I think the delays and hesitancy deals more with capital markets and banking reluctancy, not necessarily the price of oil. Over time if oil remains low it will likely have some impact, but I do not think it has had much impact in the west yet. Poor industry positioning and lack of capital access has hampered the geothermal industry to date. Power generation needs remain strong for geothermal.

Robinson:  No, it's that type of thinking that has gotten us into the energy fix that we are in currently. Because it's (correlating oil prices and alt energy demand) simply for short-term gain, but not for long-term sustainability and for global stewardship. Of course, that reasoning is illogical and only works for the short-term.

Aspire: Geothermal has been around for a century. Where are you seeing geothermal technology advance, and how do you see those advances impacting the industry?

Cook: Low temperature and EGS will clearly expand the industry greatly. The number of low to moderate temperature sites is enormous and will be a target of future development focus. The industry will begin to recognize the need to departmentalize the various approaches; flash, binary, EGS, bottom cycle, etc.

Robinson: That is correct, electrical generation from geothermal energy originated in 1904 in Italy. There are many nations that are currently planning their economic futures on geothermal development. The US has the good fortune of holding a diverse portfolio of geothermal resources. The technologies for identifying and developing these resources are continuing to improve ... and predictive models can help mitigate risk and optimize development. Finally, if enhanced geothermal systems (EGS) research and development keep good their promise, the US may be able to tap vast resources for the sustained generation of electricity."

Aspire: What can we expect from Raser Technologies in 2009?

Cook: Great progress on the outlined development plants and announcements of expansion on several fronts. Our plan is to deploy 100 MW per year of new facilities. We expect that we will begin some development in the International arena but the primary focus will continue to be the Western US. We will likely move ahead with major "partners" to exploit some of the fields that we have identified

Wind

Aspire: What is your outlook on transmission and storage issues for wind energy, and what recommendations would you make to companies developing them, and investors funding their development?

Swisher: Lack of adequate transmission infrastructure is one of the biggest obstacles to the long-term growth of wind power and other renewables in the U.S.  In essence, we simply don't have enough transmission capacity to deliver low-cost power from windy rural areas into the cities where electricity is needed.  The wind industry supports federal policies that would bring about the construction of a high voltage, interstate transmission superhighway to deliver electricity over long distances, like the one envisioned in DOE's 20% Wind by 2030 report.  (The report refers to the conceptual design of a transmission plan put forward by American Electric Power Co., one of the nation's largest utilities, http://www.aep.com/about/i765project/docs/WindTransmissionVisionWhitePaper.pdf)

Storage, on the other hand, is not essential to achieving the 20% wind vision. One of the misconceptions about wind is that it will not provide a significant amount of our nation's electricity without storage technologies in place. DOE's 20% wind scenario makes it clear that wind can provide that level of electricity by 2030 without requiring additional storage.  As the penetration level for wind climbs to 20% and above, there will be the need for the electric industry to move towards more flexible sources of generation, such as hydro, natural gas or demand response.  Storage can be valuable, but it will usually be more expensive than other sources of flexibility in the system.  It is also important to evaluate the value of storage or other forms of flexibility as they apply to the entire utility system and not simply as dedicated back-up for individual wind projects.

Aspire: The U.S. has been a world leader in terms of additions of wind capacity and cumulative capacity, but it lags several other countries as a percentage of electricity consumption. Why is this, and what factors need to happen to make the U.S. a world leader here as well?

Swisher: The main obstacle to large scale wind power development up to now has been the lack of stable, long-term, national commitment to clean energy.  At the same time, wind power has achieved a number of key milestones that make it an attractive option for generating electricity on a large scale.   Here are a few of the key factors that have moved wind into the mainstream market:
 
a. Fossil fuels are finite and increasingly expensive.  Costs for wind technology have come down at a time when costs for all new generation are rising.
b. Demand for wind - and other renewables - is on the rise, due in large part to concerns about climate change.  Consumers want clean, reliable and affordable electricity and utilities are working to diversify their resource portfolios to help stabilize prices when fossil fuel costs are increasingly volatile and in anticipation of carbon regulation costs.
c. The domestic supply chain is expanding, with the industry opening, expanding or announcing at least 50 new manufacturing facilities since January 2007.  In 2005, the average wind turbine installed in the U.S. utilized less than 30% U.S.-made components.  Turbines installed in 2008 use nearly 50% domestic components. 
d. The federal production tax credit (PTC) has been stable for several years in a row, enabling the wind industry to lay the groundwork for significant expansion in the coming years. 

The long-term policies that the President-elect has indicated he intends to put in place - a federal RPS, a long-term extension of the production tax credit, and building a Green Power Transmission Superhighway - will be key to dramatically increasing the share of electricity that the country generates from wind. 

Aspire: How do you see the current economic crisis impacting goals for wind energy growth?

Swisher: The current credit crunch is impacting the wind industry, as it is affecting every industry.  However, the wind industry continues to be well-positioned strategically, especially in relation to competing fuels and technologies.  Wind power remains among the most attractive energy investment options right now, because of its risk reduction qualities.  Wind is:

• a fuel-free resource, helping utilities hedge against  the risk of fuel price volatility,
• an environmentally sound resource, helping national efforts to reduce emissions that contribute to global warming, reducing water use, and reducing pollution; and
• an exceptionally short construction cycle compared to technologies such as coal and nuclear that can tie up huge amounts of capital for five to ten years or more of construction. 

A number of challenges remain, however, and can be addressed by changes in federal policy.  For example, the federal production tax credit (PTC) needs to be adjusted (repaired) to make it effective in the current financial situation.  (See http://www.NewWindAgenda.org)

Aspire: What policy do you expect from the Obama administration and the next Congress in 2009 for the wind industry in the U.S.?

Swisher: See New Wind Agenda and Obama-Biden New Energy for America plan.

Aspire: Proponents of geothermal energy argue that it is favorable to wind energy for utilities because it is base load energy. What is your response to that point of view, and how do you see this issue playing out over the longer term?

Each technology has its own set of characteristics, its own strengths and limitations, and that is why a mix is usually the best option.  Wind has a set of characteristics that make it attractive in a utility portfolio, including cost-effectiveness, its emissions-free nature, and its widespread availability. Utilities can typically add wind power to their portfolios without major adjustments in the planning, operations, or reliability of their systems, according to studies looking at experience or modeling wind integration scenarios, as well as experience in Europe where wind energy development is much more widespread.   Integration adjustments are lowest when new wind power is being integrated into a broad region with a diverse mix of power sources, such as natural gas and hydropower.  Improved use of forecasting, and large balancing areas also make the integration of wind power more cost-effective.

Many utilities have large amounts of wind power on their systems, including Xcel Energy, the utility with the greatest amount of wind.  Here's a quote from Dick Kelly, chairman, president and CEO of Xcel:   "Wind power is an integral part of our generating portfolio, and it has become a significant part of our nation's response to environmental challenges like climate change," said Kelly. "With the right public policy, it will be a growing and affordable part of our long-term plans."

Aspire: What are you seeing in terms of the pace and availability of project financing for wind energy in the current economic environment, and how significantly is the AWEA reining in its projections for wind energy growth in the next few years as a consequence of the still eroding U.S. economy?

It is too early for AWEA to estimate what the impact of the current economic environment might be on projections for 2009 and beyond.  The fundamentals of the technology are strong, and the countervailing factor will be the speed at which new policies are put in place by the new Administration.   As Ted Strickland, the Governor of Ohio, recently said in answer to a similar question about the impact of the economy on wind power:  "This is one industry that has a bright future and it is full steam ahead."

Aspire: Can you elaborate further as to how optimistic you are that the incoming administration and Congress will respond positively to the renewable industry's set of recommended priorities outlined by the AWEA, GEA, SEIA and Hydropower Association in November?  

We are enthusiastically looking forward to the opportunity to work with the new administration and new Congress.  Their agenda appears to be quite consistent with the agenda of the wind industry.  See the positions of the Obama-Biden New Energy For America plan, quoted in the Wind Energy for A New Era document at www.newwindagenda.org.

Anatomy of a Failing Solar Stock

MEMC (NYSE:WFR) is one of the more telling stories of just how wildly a company has missed, and continues to miss expectations, and how the Street has lagged in terms of resetting its own expectations based on a disturbing trend of poor execution.

The company missed expectations back in Q2, blaming a failure of a heat-exchanger at its Italy plant, and a loose pipe fitting in Pasadena.  It seemed to get back on track on its Q3 report of a 21% increase in profit on higher product volume. It got the endorsement of one of the solar sectors top analysts, Jesse Pichel, who said the MEMC was the best positioned in the solar value chain to weather the financial crisis. The stock was trading at about $18.76 on October 24.

The day before, MEMC gave Q4 guidance for revenue in the range of $540 to $600 million, with gross margins of about 50% and operating expenses of about $41 million. Then on October 30, it announced that CEO Nabeel Gareeb was stepping down - not a good sign. Just a couple weeks later, on November 17, MEMC cut its forecast for the Q4 to about $500 million (plus or minus $25 million), with gross margins of about 48% and operating expenses of about $27 million. A month later, this week, it cut its forecast further, to a range of $400 to $425 million, with gross margins of 46% - operating expenses still expected to be $27 million. The stock price was $15.71.

That MEMC was having execution risk seems to us to be apparent back in the Q2, and it is remarkably clear at this point. This week Deutsche Securities reiterated its BUY recommendation on the stock with a price target of $18.50 (previous targets of $68 on July 24, and $82 back in January). UBS reiterated its BUY on the stock with a price target of $20 (previous targets of $60 on July 24, and $105 back in December last year). Barclays initiated with a BUY and $25 price target. Friedman Billings reiterated its BUY rating with a $25 price target (previous targets of $30 on November 18 and $80 on July 24).

One of the few firms which seems to us to be sufficiently skeptical of MEMC given its track record in recent quarters is Caris & Company, which downgraded MEMC to AVERAGE and a price target of $13 back on November 18, the day after its first reduction in Q4 guidance.

Research & Reports

The Long-Term Economic Benefits of Wind Versus Mountain Top Removal Coal on Coal River Mountain, West Virginia

Mountaintop removal coal mines are poised to begin operation on Coal River Mountain in Raleigh County, West Virginia. In West Virginia as well as surrounding states, hundreds of mountaintop removal mines have flattened hundreds of thousands of acres of mountain peaks in order to access the coal, while pushing the waste material into adjacent valleys and burying headwaters streams.

Coal River Mountain Watch-an organization that works to stop mountaintop removal mining and to help rebuild sustainable communities-is promoting an alternative: the development of a wind farm on Coal River Mountain. This alternative would protect the surface of the mountain, produce green electricity, and preserve current underground coal mining jobs. (Excerpt From Executive Summary).

VC Investment in Cleantech through Nine Months

Ernst & Young reported that VC investment into cleantech companies reached $4.6 billion though nine months in 2008, which is an increase of 82% on a year-over year basis, and 13% of total VC funds invested in the U.S., Europe, China and Israel.

The U.S. led, with $3.3 billion invested over 135 rounds, increasing Y/Y by 71%. Energy/electricity generation companies led on a sector basis, taking in $1.8 billion in 47 rounds. Solar companies received $1.7 billion of this over 35 rounds - an increase of 152% Y/Y. Alternative fuels received $455 million up 7% Y/Y, while energy efficiency received $186 million, up 32%.

Europe raised €481 million in 53 rounds, up 67% Y/Y. Energy/electricity generation received the largest share with €371.3 million raised, up 200% with wind getting the major share, €182.7 million, while solar received €24.8 million.

China raised $165 million, up 467% Y/Y. Energy/electricity generation received the most, $95.8 million, up from $4.6 million last year, with solar leading, raising $85.2 million.

Israel raised $76.5 million, up 142% Y/Y. Energy/electricity generation received the most, and all solar, receiving $46.5 million. Water received $18.2 million.

Biofuels

Ethanol producers continue to struggle with decreases in market crush spreads in December.

Aventine (NYSE:AVR) was put on CreditWatch on Monday, being assigned a "B" junk-grade credit rating by S&P dropping its shares to $0.34. However, in today's session, the stock jumped 28% to close at $0.81 on a volume breakout, more than 4.9 million shares traded (average volume is about 600 thousand). Its stock closed up 108% this week, but the performance should be discounted by the fact that the Street has been clearly betting the company is going to have to either shut its doors or reorganize. Pacific Ethanol (Nasdaq:PEIX), which is in the same position, closed up 60% this week. These two companies completely skewed the groups' performance, which resulted in an overall gain of 11%. Green plains Renewable (Nasdaq:GPRE) closed down 15% on no announcements, and despite the fact that Chairman and CEO Wayne Hoovestol got to ring the Nasdaq opening bell.

Cosan (NYSE:CZZ) managed to close back over $3, gaining 7% on the week, as news around Brazil's ethanol industry has generally been more upbeat lately. This week we saw further investment into Brazil. LDC Bioenegia is increasing its ethanol production in Brazil to almost 20 million metric tons in 2009-2010 from 15 million tons in 2008-2009. Its parent company, Louis Dreyfus

Commodities will also invest up to $1 billion in Brazil by 2010.

Energy Efficiency and Management

Energy efficiency received more attention this week when the Department of Energy announced the award of up to $80 billion in energy efficiency, renewable energy and water conservation projects.

The energy efficiency and demand management group closed up 9% this week, led by double digit gains from Power Efficiency (OTCBB:PEFF), which this afternoon announced implementation of its motor efficiency controllers at Berry Plastics, closing up 27%; Orion Energy (Nasdaq:OESX) which has been getting a lift of late on the heels of a share purchase authorization, closing up 24%; and Echelon (Nasdaq:ELON), which didn't announce anything new, but still closed up 19%. Year-to-date, the group is down 66%.

Energy Storage

A newly established consortium, the National Alliance for Advanced Transportation Battery Cell Manufacturers, announced plans to establish manufacturing and prototype centers in the U.S. which will require about $1 to $2 billion over the next five years, and it will be seeking aid from Washington. The focus of the group is to compete more effectively with Asian manufacturers who are dominating the markets. Chances are pretty good the group, which is also talking about jobs it will create in the U.S., will get a sympathetic audience in the Obama administration.

The energy storage group closed down 3% this week, led by a 15% decline in Ener1's (Amex:HEV) stock. On Monday, Ener1 said it secured a commitment for a $30 million line of credit, and confirmed it is on schedule to deliver its advanced lithium-ion batteries to Think. Management said it is comfortable with its funding through 2009. The Street sold the stock in any case. Plug Power (Nasdaq:PLUG) fared worse, losing 29% of its capitalization, after it announced a corporate restructuring that will result in the elimination of 90 employees. On the positive side, Ultralife Batteries (Nasdaq:ULBI) continues to outperform, closing up 13%, and Maxwell Technologies (Nasdaq:MXWL) began to bounce back this week, up 16%. Year-to-date, the group is down 21%.

Geothermal

This week the Interior Department approved plans to open 190 million acres of federal lands to geothermal exploration and development, and estimates are that by 2015 development of public land leased for geothermal resources will produce up to 5,500MW of capacity. By 2025, development in these 12 western states could produce as much as 12,100MW of electricity.

Enel, Italy's largest utility, said it is launching 2 geothermal plants in the U.S. with a total capacity of 65MW. It operates 700MW of geothermal capacity in Italy.

The geothermal group closed down 1% this week, led by U.S Geothermal (Amex:HTM) which lost 19% on no specific news. Raser (NYSE:RZ) bucked the trend closing up 16% on the week. The news out of Raser has been generally upbeat lately and we think the Street is finally beginning to get its head around Raser's business model and buy into the progress. This should bode well for the business in 2009. It announced on Monday that it closed the remaining $10 million of a private placement with Fletcher International at $4.24 per share.

Solar

Solar stocks have taken a beating this year as negative sentiment has continued to build, principally driven by expectations about module oversupply and declining polysilicon prices, reductions in subsidies and government support overseas and most recently by adjustments for global economic erosion which is expected to create project delays and ASP erosion. Another factor expected to slow demand for solar projects is the nature of solar funded projects by tax equity investments and the fact that investors have less tax liabilities in the current economic environment. Funding for solar projects and capacity expansion is likely to remain challenging for the next couple quarters, but the question is whether this sentiment is overdone, or at least whether it has been priced into stocks at this point. We think it has.

The legislative environment for solar, as well as other renewables has never been better, both here and abroad. Recent commitments from the EU to increase its renewable consumption, France in particular is increasing its solar targets, while Japan's next round of subsidies are expected to kick in. Here in the U.S., look for the incoming administration and Congress, which are extremely friendly to renewable energy, to make appropriate adjustments for incentives that are less contingent on tax liabilities.

To be sure, some companies have sold off for better reasons than others, pace MEMC (see above), which lowered its guidance once again this week citing a lack of available credit which is constraining customers' purchasing capacity.

The upstream solar segment traded higher 2% this week, led by PV Crystalox (PVCS.L) which  traded higher 22% this week, on no news announced. But the recent news has been generally positive. In November, it guided higher wafer shipments to a range of 225-230MW, affirmed that 95% of its 2009 production has been secured and said construction of its new 1800MT poly facility is going to be completed this month with production expected to commence in April, 2009 (targeted at 900MT). Its stock fell earlier this month when Q-Cells said it is delaying about 2.5% of its output. The group is down 54% year-to-date.

In one of the more impressive announcements this week, Hemlock Semiconductor said it is going to invest about $3 billion to expand production at its Hemlock, Michigan facility and into the construction of a new poly plant in Clarksville, Tennessee. The total anticipated capacity is expected to reach as much as 34,000MT.

The solar equipment/systems group declined by 5% this week, led by Spire (Nasdaq:SPIR) which shed 18%. Its stock fell by more than 10% this afternoon alone, which isn't a good sign heading into next week. The stock that surprised us was Satcon (Nasdaq:SATC) which we expected to get more of a boost on the heels of its announcement of a 40MW supply agreement with Siliken Renewable Energy. Year-to-date, the group is down.

The midstream solar group had a solid week, closing up 7%, led by Q-Cells (QCE.DE) which gained 26%, ReneSola (NYSE:SOL) which gained 22%, Suntech (NYSE:STP) which gained 19% and First Solar (Nasdaq:FSLR) also adding 19%. Despite the fact, as we noted above, that there are still plenty of reasons to be cautious in the near term about growth, we are noticing an increasing view that all of the bad news has been factored into the solar sector, and that the stocks are poised, generally speaking, for a rebound in January.
64%.

Downstream, the solar integrators gained 4% this week, although the tally is skewed by Premier Power (OTCBB:PPRW) which is generally an illiquid stock, which closed up 56% on 1,700 shares traded all week. Excepting that, we would point to Real Goods (Nasdaq:RSOL) which gained 10% and Solar Integrated (SIT.L) which gained 12% as the leaders. Akeena (Nasdaq:AKNS) continues to struggle, revising its 2008 growth rage lower to a range of 25% to 30% Y/Y from 30% to 40%. Year-to-date, the group is down 69%.

Wind

Wind has been hit hard alongside solar as the positive benefits of tax credits has been lost in large part due to the economic environment. And with solar, the heat has been on amongst wind energy advocates and lobbyists in Washington to expand tax benefits in the upcoming stimulus package which will help get project financing and support for wind back on track. This will more than likely come in the primary form of making the tax credits refundable. Tax credit benefits for wind currently are tied to the number of kWh produced as well as enabling investors to depreciate equipment over a five-year period. The wind industry is advocating a one-year extension of the production tax credit through 2010 and for making the depreciation refundable. It remains to be seen how much this refundable aspect will get support on Capitol Hill, but it is at least pretty clear that Washington will be working early in 2009 to bring legislative support to kick-start the wind energy industry.

It was a positive signal to see the wind group close up 8% this week, led by A-Power (Nasdaq:APWR), which, in our opinion, is the most oversold and undervalued stock in the sector. Even at its closing price today, it is trading at a P/E (ttm) of 7.7 and a P/E of 5.54 against management's forecasted income this year, and a P/E of 2.7x management's forecasted income for FY2009. We were also pleased to see American Semiconductor (Nasdaq:AMSC) getting more of a lift, closing up 8%. Year-to-date, the group is down 60%.
 

About Aspire Clean Tech Communications, Inc.

Based in San Diego, Aspire Clean Tech Communications is dedicated to providing strategic consulting and communications services to businesses operating in the alternative energy and clean tech industries. Our commentary and outlook on the public markets and the alternative energy can be found on a daily basis at www.smallcappulse.com.

For more information about Aspire Clean Tech Communications, Inc., contact Todd M. Pitcher at 858-518-1387.

This Aspire Week in Review was sponsored by Comanche Clean Energy, Inc., a leading Brazilian ethanol and biofuel firm bringing the lowest cost and most efficient alternative energy solutions to the world, and Hayden Communications, Inc., Wall Street's leading corporate communications firm. For more information about Hayden Communications, call 646-536-7331, for more information about Comanche Clean Energy; contact Todd M. Pitcher at 858-518-1387.

The Aspire Week in Review is brought to you by Small Cap Pulse the best source on the web for financial and economic commentary, stock recommendations, and a fresh idea. To learn more about Small Cap Pulse, call 858-509-9900.

 

Disclaimer: Information has been obtained from sources considered to be reliable, but we do not warrantee that it is accurate or complete. This material is not an offer to sell or a solicitation of an offer to buy any securities. While we believe all sources of information to be factual and reliable, in no way do we represent or warrantee the accuracy thereof, nor the statements made herein. THE READER SHOULD VERIFY ALL CLAIMS AND DO HIS OR HER OWN DUE DILIGENCE BEFORE INVESTING IN ANY SECURITIES MENTIONED. COMMON STOCKS INVOLVE SUBSTANTIAL RISK AND IT IS POSSIBLE TO LOSE YOUR ENTIRE INVESTMENT.   This information is not an endorsement of the Company by SCP. SCP is not responsible for any claims made by the Company. You should independently investigate and fully understand all risks before investing. Statements included in this email or fax may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve a number of risks and uncertainties such as competitive factors, technological development, market demand and the Company's ability to obtain new contracts and accurately estimate net revenues due to variability in size, scope and duration of projects, and internal issues in the sponsoring client. Further information on potential factors that could affect the Company's financial results, can be found in the Company's Registration Statement and in its Reports on Forms 10-K and 10Q filed with the Securities and Exchange Commission (SEC).