Shares in AIM-listed biofuels outfit D1 Oils plc (LSE: DOO.L – news) are showing more sharp falls this morning after a 36% drop on Friday. The company said the influx of heavily subsidised US biodiesel is putting the entire EU green fuel industry at risk. The US government is promoting the production and use of biodiesel for transport under the so-called B99 scheme, in which producers could claim a subsidy of up to $1 per gallon if they blend 99 pct biodiesel with 1 pct mineral diesel.

Massive exports of unfairly subsidised biodiesel are now threatening the EU green fuels industry by seriously eroding the available margin on refining vegetable oils and putting at risk jobs in both Europe and in developing countries that are able to produce sustainable biodiesel from crops such as jatropha curcas. Around 1 million tonnes of B99 biodiesel are believed to have been ‘dumped’ by the US into the EU this year. About 10% of that consisted of biodiesel produced from palm plantations planted on rainforest in Southeast Asia, blended in the US and then sold on to the EU.

‘If these practices are not stopped, there will be no biodiesel refining industry in Europe,’ said Karl Watkin, founder and non-executive director of D1 Oils.

Update: Karl Watkin, founder and former chairman, has resigned from his role as non-executive director of D1. In a statement, Watkin said he is quitting out of frustration over the investment community’s inability to differentiate D1′s strategy from that of the suppliers of palm, soya and rapeseed ‘whose biodiesel products have been well documented as being environmentally unsustainable.

”I am particularly disheartened by the plethora of so-called experts on climate change who fail to distinguish between jatropha and other non-sustainable biodiesel feedstocks.

‘This lack of differentiation, combined with the London Stock Exchange’s failure to address both the liquidity problems of AIM and the impact of shorting of illiquid stocks, have conspired to erode the value of D1″.

D1 Oils has teamed up with UK oil giant BP PLC for a $160 million biodiesel project that uses jatropha, an inedible oilseed bearing tree, as a feedstock. The joint venture, called D1-BP Fuel Crops Ltd, intends to plant 1 million hectares of jatropha in its first four years. Production is expected to start next year. D1 has started a consultation process with employees on the future of its Middlesbrough and Bromborough sites, as part of a review of its downstream refining and trading operations.

‘Imports of heavily subsidised biodiesel have eroded margins to the point where we have no choice but to consider how to reduce operating costs. We are taking this action to manage the business proactively in a difficult market,’ chief executive Elliott Mannis said.

The distortion effect of subsidies is magnified by EU targets specifying that 2.5% of all fuel sold from pumps must be obtained from renewable sources. One tonne of B99 from the US costs about $1200, while buying soya to produce your own costs $1400, with another $150 for processing costs. You don’t have to be a rocket scientist to see where the biofuel to satisfy our renewables obligations will come from.

D1 is a company that’s ticking all the right boxes in terms of sustainability, producing biodiesel from a non-food plant that they are planting in marginal and non-agricultural land in developing countries round the world. They are being put under severe pressure by market distortions caused by US subsidies for biodiesel, wherever it comes from: American corn, rainforest palm oil, who cares? It does make you wonder, though, what the US government thinks about their subsidised oil being exported, rather than going to meet domestic biofuel targets. Or is the US economy in such a desperate state that they’ll export anything for foreign currency?

Perhaps the UK should consider ‘tuning’ its tax rebates on biofuels to exclude these imports. I feel another trade war coming on.

Shares in Ceres Power Holdings (CWR.L) rose sharply this morning on the news that Centrica, the parent company of British Gas, has taken a 10% stake in the AIM-listed fuel cell company. The shares are being bought at £3.00 per share, substantially lower than the £3.25 they reached last September when Ceres announced successful trials of their domestic combined heat and power (CHP) boiler. (“Domestic Micro-CHP”)

The total investment is around £20m. Centrica will also pay £5m to Ceres in staged payments to support the development of the CHP units, with £4m conditional upon the achievement of specific milestones. The agreement will grant British Gas rights in Great Britain to market and sell the Ceres CHP unit to domestic customers for four years. Last September, British Gas commented:

“Plans are underway to move from the demonstrator prototype to field trials which will culminate in a commercially available product, but it will be a few years off before we have anything on sale to customers.”

Today’s announcement is consistent with that position, providing a guaranteed investment stream for product development, so no immediate prospect of having our own gas-powered power station. We can only speculate on the kind of take-up BG will get for this product. Those who remain skeptical of the idea that small individualistic gestures can ever change the world will no doubt dismiss it as an irrelevance. And what use will it be when the gas runs out?

These uncertainties don’t seem to bother E.ON, who have today announced a similar agreement, with Energetix Group (EGX.L), to develop a micro-CHP device. E.ON will fund the testing and evaluation of a Genlec micro-CHP system at the Energetix facility in Cheshire. The evaluation, scheduled for completion in the first half of this year, will outline the energy savings achieved during testing of the system and assess its commercial value. E.ON estimates that the device could reduce residential energy bills by up to £150 a year.

Shares in Renewable Energy Holdings (REH.L) were up today on the news that the green technologies firm has agreed a deal to purchase the Kobylany wind farm site in Poland, which will provide 30 MW of generating capacity with an accompanying off-take infrastructure and transformer station. REH will pay €68,000 per MW of generating capacity, making a total of €2.04m. The agreement allows for an initial lease term of 25 years, with an option to extend for a further 25 years.

The annual lease payment will be €25,000 (plus VAT) with an additional annual payment of €7,000 (plus VAT) for each turbine on the site. It is expected that there will be 15 wind turbines altogether. Construction is expected to start in Spring 2008, financed by REH’s credit facility with Standard Chartered Bank. Good to see the credit squeeze doesn’t apply for renewable projects.

REH is active in wind, wave and biomass. The company owns the CETO wave energy technology, which it is developing in co-operation with Carnegie Corporation.

A new community-owned hydro power project has launched a share offer today. Torrs Hydro New Mills Ltd plans to install new hydro-electric technology in the 200 year old weir at the Torrs in New Mills, Derbyshire. The company, a joint venture between Water Power Enterprises and High Peak Friends of the Earth, is an ‘Industrial and Provident Society’ which was officially formed in September 2007. It has four founding directors and has now launched a share offer to help raise £126,000 for the project. Each share will cost £1 with a minimum shareholding of £250 and a maximum of £20,000. Shareholders will get a “modest” rate of interest on the shares, but most of the profit from the project will go as grants for regeneration and environmental projects in the New Mills area.

The hydro project, only the second of its kind to be installed in the UK, will generate enough green electricity for 140 homes, as well as cash to fund local regeneration schemes. It uses a modernised version of a 2000 year old Greek invention – the Archimedean screw – to generate energy. The technology is very efficient at generating electricity from weirs, and has huge potential for installation in other old mill sites throughout the region.

Richard Body of High Peak Friends of the Earth said:

“This region’s got an abundance of water power which can deliver pollution-free energy. By investing in the regeneration of these old hydro sites we can do our bit to tackle climate change and regenerate our communities at the same time. However we also need to see the Government do much more to help renewable technologies such this flourish in the UK. They can start by introducing a strong climate change law which commits the UK to cutting its carbon dioxide emissions by at least 3 percent a year.”

Prospectus (available by download from Saturday 24th November 2007)

High Peak FoE Press releases

Water Power Enterprises

It’s a good job someone’s looking at increasing the supply of silicon for the solar industry (“IBM Recycles Silicon”) . In his article “Profit from the End of Cheap Oil“, Ian Cooper describes how the hopes of the solar industry to provide a viable energy alternative to oil depend on a reliable and continuing supply of polysilicon. At $70 per kilogram, the price of polysilicon has doubled since 2004. Very few solar companies world-wide have the resources to meet an insatiable demand for panels, so they have started investing in polysilicon manufacturers to fund the construction of new facilities and increase output.

Without solar panels, there’s no solar power. The industry is dead in the water. All the current activity in the solar sector will grind to a halt.

Face it. Strong global demand for solar isn’t going to slow in the face of $95 oil . . . and there’s plenty to get excited about thanks to China’s insatiable demand ahead of the Summer 2008 Olympics, and the United States’ solar energy plans:

· George W. Bush has announced plans to increase federal government spending on solar energy to $150 million.

· California’s Governor Schwarzenegger has pledged a million solar rooftops by 2017.

· And New York’s Governor George Pataki has inked a bill offering a $5,000 tax credit to homeowners who install solar-power roofing.

· Add to this the Chinese parliament’s plans to convert 10% of the country’s energy consumption to renewable energy sources by 2020, including the use of solar-generated electricity and solar water heating, and you’ve got an emerging industry with only a select few players for all the wealth to flow to.

Small wonder that there’s a “feeding frenzy” going on in the solar industry. Whether this bubble will burst depends on the supply of raw materials and the future development of alternative technologies which might change the industry beyond recognition.

Hargreaves Lansdown, the UK investment management group, is making an effort to emphasise its ‘green’ credentials. To mark the launch of their Socially Responsible Investment service, they are offering a free tree to anyone who invests a minimum of £3,000 or £100 per month in any fund mentioned in their Ethical Investment Guide. A free copy of the Guide can be downloaded here, although you do have to register first.

HL also offer a handy little Ethical Investment Fund Comparison Tool, which “allows you to quickly see which funds meet your ethical investment requirements. Select the ethical and environmental criteria that are most important to you to see a shortlist of funds that apply those policies and the full details”.

Sadly, if you filter out all the Bad Things you get

None of the 66 funds that have a stated policy on each of the categories, and therefore merit inclusion in the comparison, meet what I would call truly ethical criteria. I would not knowingly invest in a company that involved itself in any of the activities on the negative screening list, except maybe nuclear power, and unticking that box doesn’t make any difference. Something tells me someone’s not really walking the walk on this one. Have a play with the comparison ‘tool’ and see what you think.

If more proof were needed that environmental issues have entered the financial mainstream, look no further than HSBC. The bank plans to grab a slice of the growing market for socially responsible investing with a new fund that will exploit opportunities from climate change. The Climate Change Fund launches in early November, subject to regulatory approval, and will invest in 60 companies likely to benefit most from efforts to curb global warming. The fund’s constituent companies will be selected from HSBC’s Global Climate Change benchmarking index of 300 companies from 34 countries.
http://business.scotsman.com/banking.cfm?id=1674482007

Don’t assume that sticking a ‘green’ label on your organisation means automatic success. While HSBC looks set to profit from climate change with its new products, at the other end of the scale the Big Green Gathering is in trouble. BGG is a 5-day camping event for “people who care about health, the environment, sustainability, our children’s future and life in general. It is a celebration of our natural world and our place within it”. Attracting between 15,000 and 20,000 people, BGG developed from the original Green Gatherings of the 1980′s and the Green Fields of Glastonbury Music Festival in response to a desire for a festival that was focused on Green issues.
Sadly, licence conditions imposed by Mendip District Council and Avon & Somerset Police added around £120,000 to the costs of this year’s event, turning an expected profit into a deficit of £75,000. On top of similar deficits in 2005 and 2006 BGG now has debts exceeding its assets by around £150,000, and will have to declare itself bankrupt unless £100,000 can be raised through donations or buying shares in the company.
http://big-green-gathering.com/index.php?pageid=233
No licence to print money in Somerset. The Big Green Gathering Co Ltd declares itself to be a “not-for-profit democratic company”, and is obviously living up to that aspiration, while HSBC is very much a for-profit company. Perhaps that explains their different situations. HSBC has been trumpeting its green credentials for years, and growing rich on the back of it. Wouldn’t it be nice to think that perhaps they might forget about profits for a moment and help to keep BGG afloat? Don’t hold your breath.

World expert on Economics and Climate Change becomes HSBC Special Adviser

HSBC “Commit to Change”

Shares in Ceres Power Holdings (CWR.L) performed strongly again this morning, as the AIM-listed fuel cell company demonstrates its domestic wall-mountable integrated combined heat and power (CHP) boiler.

In a press release, Ceres said:

” [This] represents an important milestone in the Company’s residential CHP programme with British Gas and highlights the commercial potential of the product. The compact and wall-mountable design will enable access to both the boiler replacement and new build residential mass markets in the UK and overseas.
“As part of an ongoing testing programme, the integrated wall-mountable CHP Unit has already demonstrated the capability of generating electricity and all of the central heating and hot water requirements of a typical home, avoiding the need for a separate boiler. The compact CHP Unit uses the same natural gas, water and electricity connections as a boiler, and is thus easy to install.”

In March 2006 Ceres signed a £2.7m deal with British Gas, part-funded by the Department of Trade and Industry, to supply domestic CHP units. Peter Bance, Ceres CEO , said at the time: “Most UK households will have their own power station [one day]. It will be massively cheaper than buying electricity from the grid.”

According to Mr Bance, the Ceres CHP unit will not cost much more than a conventional boiler. It runs on regular natural gas, which is converted into energy in the fuel cell. Mr Bance said that households may consume around the same amount of gas but all their electricity would be generated for free, as a by-product.

“It’s a no-brainer,” said Mr Bance. “For a very modest price premium to a boiler, households will save £400 or £500 a year.”

When I first heard about this, it seemed quite a seductive idea. However, I’m beginning to wonder how it will work in practice, especially in tandem with other domestic power systems such as photovoltaics or solar water heating. And after all, it still uses fossil fuel, so it’s perhaps not quite the magic bullet that it’s presented as.

A copy of the presentation will be available shortly at www.cerespower.com

In an Energy and Capital article, Chris Nelder does some rough calculations to determine what oil is really costing the United States, factoring in all the externalities.
Crude Cost: $69 a Barrel
If the U.S. daily crude oil consumption, 21 million barrels, were bought at the market price (roughly $69 per barrel), it would cost the economy $1.5 billion per day, or $529 billion per year.
Cost of Dependence: $233 Billion a Year
A 2000 study for the Department of Energy reported that supply disruptions, price hikes, and loss of wealth caused by oil market upheavals cost the U.S. economy around $7 trillion (1998 dollars) between 1970 and 2000. The study focused on macroeconomic adjustment costs, the potential loss of GDP, and wealth transfer, but noted “These cost estimates do not include military, strategic or political costs associated with U.S. and world dependence on oil imports.”
All Economic Costs: $480 a Barrel
After taking into account the direct and indirect costs of oil, the economic costs of oil supply disruption, and military expenditures, Milton Copulus estimates the true cost of oil at $480 a barrel, equivalent to an annual expenditure of $10 trillion.
Government Subsidies
Depending on how you figure it, what you leave in and what you leave out, direct and indirect subsidies come to between $584 billion and $1.9 trillion per year. Typical hidden or disregarded costs include:

• Loss of income from leasing public lands to oil companies for minimal rents
• Tax-funded programs that directly subsidize oil production and consumption
• Health costs from pollution, reduced crop yields
• Direct and indirect costs of traffic delays, traffic accidents, subsidized parking

Environmental Costs
Burning fossil fuels has serious environmental costs: water and soil pollution, loss of biodiversity and ecosystem services. A 1995 article from the Union of Concerned Scientists arrived at a 1991 figure for environmental externalities of between $54 billion and $232 billion. Allowing for inflation, the current cost could be as much as $345 billion a year.
Climate Change Cost
Using a figure of $35 per ton as the cost of CO2 emissions, burning oil and gas is costing the U.S. $56 trillion per year.

The author Chris Nelder freely admits that these figures are ‘back of a fag packet’ stuff, and frankly to my eyes some of the numbers are inconsistent to put it mildly. Even so, there’s enough here to call into question the mantra that renewable energy is too expensive compared with ‘cheap’ oil and natural gas. As he says, “No wonder $71 billion of new capital was poured into the renewables sector last year”

A new report from the United Nations Environment Programme, ‘Global Trends In Sustainable Energy Investment 2007′, says that global investment in sustainable energy has increased from $80 bn in 2005 to a record $100 bn in 2006.

The EU and the US were responsible for over 70% of investment in 2006, but the increase from 15% to 21% in developing economies is encouraging.

Renewables produce about 2% of the world’s energy, but now account for about 18% of global power generation investment, with wind technologies leading the way. Solar and bio-fuels grew even more quickly than wind, but from a lower base.

This sustained growth, in what can no longer be dismissed as a ‘niche’ sector, is attributed to concern over climate change, high oil prices and growing government support.