(Source: Green Tech blog) An MIT team has come up with plans for two new airplanes that by 2035 could require 70 percent less fuel than today's aircraft. Originally posted at Geek Gestalt

(Source: Alternative Energy - References: Renewable Energy Law Blog) Pushker Kharecha and his colleagues believe that we should follow some practical methods to do away with coal and conventional fossil fuel emissions. We all know that use of fossil fuels leads towards carbon emissions that cause immense damage to

(Source: AutoblogGreen - References: The Oil Drum) Filed under: EV/Plug-in, BMW, Green Daily BMW has been actively working on electric vehicles for more than 20 years. The vehicles pictured above represent a limited view of the company's efforts, but all are nothing more than concepts or one-off

(Source: ENN Global Warming and Weather - References: AboutMyPlanet.com) Yesterday at the Lightfair International tradeshow in Las Vegas, Royal Philips Electronics unveiled its breakthrough EnduraLED light bulb. This bulb will be the world’s first LED replacement for the 60 watt incandescent light bulb, which

(Source: Green Chip Stocks - References: Energy and Capital,Energy and Capital) Over the years, we've made a boatload of cash on solar. Take a look at a list of our top solar winners from 2005 to 2009: 2005 – World Water & Power Corporation (OTCBB:WWAT) – 53.34% 2006 – XsunX,

John Petersen

The greatest truth in micro-cap corporate finance is that small companies have a lot in common with small children in third world countries – they rarely die of starvation but they frequently die of dysentery. In hard times, small companies that need additional capital can usually find the cash if their management has enough humility to accept the price the new financiers are willing to pay. The problems can quickly become life threatening, however, if management fails to adjust spending to accommodate business conditions or rejects available financing because the terms seem predatory. My advice to clients has always been "take the money when it's available, even if you don't like the terms, because shareholders adjust quickly to sensible decisions but they rarely forgive failure."

Last December a former client Axion Power International (AXPW.OB) found itself with a Hobson's choice because it needed substantial financing to pursue its development plans and the price the new financiers were willing to pay was painfully low. Management made the right decision and sold 45.8 million common shares at $0.57 per share, which was a big discount from the prevailing market price of $1.58 per share, but worked out to roughly 5.7x the company's adjusted pre-financing book value of $0.10 per share.

Earlier this week, ZBB Energy (ZBB) filed an SEC registration statement for an offering of up to $10 million in common stock. Concurrently, it added going concern language to the footnotes in its quarterly financial statements. The market's reaction was violent and shares that closed at $0.80 on March 31st closed at $0.28 yesterday, or 1.27x its book value of $0.22 per share. There's no way to predict what ZBB's offering price will be, or for that matter whether the offering will be successful in a tough market, but given the very small spread between the current price of ZBB's stock and its book value per share, I tend to think the market reaction was overblown and ZBB's shares are attractive at current prices in spite of the uncertainties. In any event I have to admire a management team that's willing to bite the bullet and take appropriate steps to insure their company's survival.

While Axion and ZBB each followed a rational path and got punished by the market for a good business decision, all the companies in my "cool emerging" category have comparable if not greater problems that seem to be complicated in some cases by an unwillingness to bite the bullet on financing terms or slash spending to accomodate current realities. The following table provides summary information on the six companies in my "cheap emerging" and "cool emerging" categories in ascending order of unsatisfied funding needs for the balance of 2010. Comments on each company follow the table.



Axion has enough cash and working capital to support up to three years of operations at historic levels. Now it's all up to the PbC battery. If ongoing testing by first-tier European and American automakers leads to significant purchase orders, Axion will be able to begin plant expansion with existing capital and, if necessary, go back to the market with a proven value proposition and a solid book of business. If it encounters delays or disappointments, there will be enough cash to weather the storm and solve the problems without going to the market in a position of weakness. Either way the stockholders win because there is no reasonable prospect of dilutive financing for the foreseeable future. Cash is a great thing and I'm delighted that management made the right decision even if the market reacted badly.

Altair Nanotechnologies (ALTI) has a reasonable market capitalization ratio of roughly 2x book value and modest capital spending plans for this year that will be contingent on increases in customer demand for its products. Altair believes its working capital together with revenue from product sales will be sufficient to support its operations for approximately six months.  Consequently, Altair will seek stockholder authorization for a reverse split at its annual meeting next week and plans to raise an undisclosed amount of new capital during 2010. There's no way to predict what the terms of a future Altair offering will be, or for that matter whether the offering will be successful in a tough market, but given the reasonable spread between the current price of Altair's stock and its book value per share, I tend to think Altair's shares are attractive at current prices in spite of the uncertainties. Altair's planned financing and reverse split may prove to be unpopular with some stockholders, but they seem likely to insure the company's survival and that's ultimately the only thing that matters.

Beacon Power (BCON) has a reasonable market capitalization ratio of roughly 1.8x tangible book value and more rigid capital spending plans that represent its share of PP&E spending that is not provided by DOE loan facilities.  Beacon believes it will need to raise $18 - $20 million in 2010 to continue the orderly implementation of its business plan and will seek stockholder authorization for a reverse split at its annual meeting in July. There's no way to predict what the terms of a future Beacon offering will be, or for that matter whether the offering will be successful in a tough market, but given the very small spread between the current price of Beacon's stock and its book value per share, I tend to think Beacon's shares are attractive at current prices in spite of the uncertainties. Beacon's planned financing and reverse split may prove to be unpopular with some stockholders, but they seem likely to insure the company's survival and that's ultimately the only thing that matters.

Valence Technology (VLNC) has always baffled me because I can't understand how a company that's under water to the tune of $75 million maintains a $120 million market capitalization. As near as I can tell Valence owes its survival to loans from a principal stockholder and occasional open market sales of its common stock. In a case like Valence, all I can do is paraphrase the late Billy Holliday, "papa may have, and mama may have, but god bless the company that got its own."

Ener1 (HEV) has consistently carried a market capitalization that's way out of line with its tangible book value. It also has a very high burn rate and aggressive capital spending plans that will require huge amounts of new financing in the immediate future. Ener1's most pressing problem is a $15 million note to Credit Suisse that matures in late June, but its capital spending plans are critical to an ARRA battery manufacturing grant the DOE awarded in August of last year. Ener1 plans to finance its operations and capital spending from open market stock sales and other sources. While Ener1 believes it has access to sufficient capital to continue its planned operations, I'm left with the nagging question "at what price?" In connection with its IPO, A123 Systems (AONE) sold stock for 5.75x its pre-offering tangible book value before. Unless Ener1 can convince investors that it's a better company than A123, I have a hard time imagining a substantial equity offering priced above $1.50 to $2.00 per share.

As a younger man I spent some time in the oil business and learned you don't start drilling a well without enough cash to reach your target depth, complete a successful well, build pipeline and storage facilities and provide for reasonably anticipated contingencies. That's a tall order in corporate finance where the cost of reaching the next milestone is always uncertain. A123 raised enough cash in its IPO to build a U.S. plant and begin production. As painful as its December financing was, Axion has at least a couple years of running room. All of the other emerging companies on my tracking lists will have to endure some pain over the next few months as they seek new capital in a tough market. Those that make solid decisions will emerge stronger for it. Those that don't will fail.

Disclosure: Author is a former director of Axion Power International (AXPW.OB) and holds a substantial long position in its stock.

Peak What? Eamon Keane

The Energy Information Administration (EIA) released its Annual Energy Outlook 2010 (AEO 2010) last week, with projections out to 2035. It makes for interesting reading. Most notable was its take on peak oil, natural gas vehicles and on converting natural gas to liquids (GTL).

An otherwise reasonable report was marred by the presumption of oil plenty. Figure 1 shows a graph presented (.pdf) by Glen Sweetnam, director of the EIA's International, Economic and Greenhouse Gas division, in April 2009. Although it mentions the source as being the AEO 2009, this data does not appear in the AEO 2009. It presumably is data from the modeling system which isn't publicly released.



The large gap of some 52 million barrels per day (mb/d) is quite stark. Fortunately we can all breath a sigh of relief, because the AEO 2010 has found this phantom oil, and then some. Figure 2 shows data from Table C6 (page 180) for the sources of oil supply the EIA forsees in its reference scenario. I added in the yellow line to illustrate oil that will have to be brought online.



I used the reference scenario showing 2035 oil supply of 112mb/d to save you spitting your coffee at the low oil price scenario. The low oil price scenario has 2035 oil at $50/bbl and supply at 127mb/d. Seriously. The reference scenario assumes an average price of about $120/bbl and the high oil price scenario has average oil at about $180/bbl, with 2035 supply at 91mb/d.

These numbers are artifacts of the National Energy Modeling System (NEMS) used by the EIA. It has cost curves for all the oil producers in the world, and the three oil scenarios make different assumptions about 'economic access' to these oil supplies. For instance the low oil price scenario assumes that "greater competition and international cooperation will guide the development of political and fiscal regimes in both consuming and producing nations, facilitating coordination and cooperation among them". Whatever that means. The EIA also accept the fantastic notion that OPEC has 940Gb of reserves, and that the world has 1,340Gb. You will notice that the area under the total conventional crude curve is some 900Gb, with no peak in sight. This is either geological illiteracy or assumes we'll suddenly find a few Ghawars under the couch.

The AEO goes on to spend several pages discussing the Pickens Plan. Overall, their analysis is quite cool to the potential for Heavy Duty Natural Gas Vehicles (HDNGVs). They say:

"The Department of Transportation’s Vehicle Inventory and Use Survey (VIUS), last completed in 2002, suggests a wide range for the intensity of heavy truck use. Notably, in the 2002 VIUS, trucks reporting a primary range of operation that extended more than 500 miles from their base averaged 91,000 vehicle-miles traveled (VMT), or more than 5 times the average of 17,000 VMT for trucks reporting a primary range of operation range within 100 miles of their base.

Although long-distance trucking offers a potentially faster payback of the incremental capital costs for HDNGVs, their penetration and acceptance in the long-distance freight market faces two significant barriers: limited driving range without refueling and a lack of available fueling infrastructure. A diesel truck with one 150-gallon diesel tank and a fuel economy of 6 to 7 mpg can drive approximately 1,000 miles without refueling, which can be extended readily with an auxiliary fuel tank. In contrast, a CNG-fueled truck with a frame-rail-mounted storage tank can drive only about 150 miles without refueling, while one with a back-of-cab frame-mounted storage tank can drive about 400 miles without refueling, similar to an LNG-fueled truck with frame-rail-mounted tanks. In addition, regardless of fuel type, long-distance trucks are less likely to be fueled at central bases, which makes them more dependent on fueling infrastructure that is open to the public.

In addition to concerns about driving range and refueling, the residual value of HDNGVs in the secondary market is likely to be an important consideration for buyers. Also, purchase decisions can be influenced by other factors, such as weight limits on highways and bridges, which can make the considerable additional weight of CNG or LNG tanks a significant drawback in some market segments."

Even assuming that long haul trucks adopt natgas, and assuming that incremental HDNGV purchase costs over diesel costs are neutralized with tax credits and $100k subsidy per new NGV station (Pickens Plan), they arrive at about a 40% freight market share in 2035, with approximately 0.67mb/d of oil being abated. That's about 4% of current annual US oil consumption. Figure 3 shows the cost of tax credits versus the cost of fuel saved. By the AEO's estimates, the tax subsidy is larger than the reduction in fuel costs. This does not account for the benefit in balance of payments or energy security, however. Figure 3 assumes 0.67mb/d is achieved and with subsidies until 2027, per Pickens Plan.



The AEO also discusses the potential for converting natural gas to liquids. They produced break even curves based on high and low estimates for GTL plants. Figure 4 shows an adapted version of Figure 28 (page 49). Below the line is the feasible region. The AEO assumptions are a 10% hurdle rate and a 10 year operating period.



This is interesting, and based on your projections of future oil prices, you can see what natural gas price is tolerable. For instance at $150/bbl, if GTL plants turn out to be very expensive (only a couple are in operation so costs aren't really known), only $2/MMBtu would be tolerable. On the other hand at the low end of the range $11/MMbtu would still allow for a 10% return. It should be noted that 43% of the energy in natural gas is lost in the conversion process, not the best idea in an energy constrained world.

Regarding Coal to Liquids (CTL), the EIA says "although advances in coal liquefaction technology have made it commercially available in other countries, including South Africa, China, and Germany, the technical and financial risks of building what would be essentially a first-of-a-kind facility in the United States have discouraged significant investment thus far. In addition, the possibility of new legislation aimed at reducing U.S. GHG emissions creates further uncertainty for future investment in CTL." CTL involves a loss of 55% of the energy in coal (page 137 of the AEO's assumptions document).

The EIA gives a big shout out to shale gas also. In the High Shale Gas scenario, the EIA sees shale output increasing to 8 tcf by 2025 and 10tcf by 2035. This assumes a Henry Hub price of about $7/MMbtu, although the full-cycle profitability of shale gas at such levels is disputed. In all the EIA's natural gas scenarios, natural gas production never goes above 27tcf, which is 3tcf higher than 2008's 24tcf.

The AEO 2010 is a very useful document but its highly improbable forecast of oil supply means if you're looking for peak oil leadership from the EIA, you'll have to dream on.

Eamon Keane is an Energy Systems Engineering masters student at University College Dublin with an interest in electric cars, rare earth metals and energy.  He is looking for a job in the energy sector anytime after August 2010.