4 GW in First Half of Year a Record

While the second quarter’s growth rate was less than half that of the record first quarter, the two quarters add up to another record — for installed wind capacity in the first half of the year (~4 GW vs. 2.7 GW in H1 2008). And even though we are near the bottom of a deep recession, the second quarter growth of 1.2 GW was equal to Q2 2008. It brings total US wind capacity to a world-leading 29.4 GW.

Major growth occurred in 10 different states across the country. In percentage growth, Missouri led the pack by almost doubling its wind capacity last quarter to over .3 GW (too bad MO Senator Claire McCaskill (D) is slowing the current climate bill that would help the state take further advantage of their wind resources). Pennsylvania and South Dakota also had double digit growth rates at 28% and 21%, respectively. Texas extended its leadership in wind by passing 8 GW, while #2 Iowa passed 3 GW.

My top 10 states list in rough percentage of electricity from wind shifted a little:

1. Iowa (~19% of its electricity from wind)
2. North Dakota (just below 18%)
3. Wyoming (over 15%)
4. Oregon (over 8%)
5. South Dakota (almost 8%, up from a tie for #7)
6. Minnesota (~7.5%, down from #5)
7. Kansas (~7%, down from #6)
8. Texas (almost 7%, up from #9)
9. New Mexico (~6.5%, down from a tie for #7)
10. Colorado (~6%)

Wind capacity can now generate ~1.9% of US electricity demand. Wind may pass 2% by year’s end, further crowding out dirtier coal, oil, and natural gas consumption.

Fewer Wind Farms Under Construction Though

The difference between 2009 and 2008 is the second half of the year. Last July, there were ~9 GW under construction. But this July, the queue is a lower ~5 GW (even though it’s a vast improvement from the smaller 3.4 GW under construction at the end of Q1). As I wrote last week, wind farm construction is expected to pick up tremendously in 2010 to a new record above 10 GW.

Could 2009 Rival 2008?

The second half of 2009 is expected to witness a significantly slower pace of installation than last year (almost 5 GW) on more difficult financing and reduced US electricity demand. But the lower turbine prices and the federal stimulus support emerging in the months ahead may help 2009 get close to last year’s phenomenal growth. AWEA projects annual growth of 6-7 GW (second highest ever), with growth continuing at the second quarter’s rate over the next two quarters. They are probably right, since wind farms are such huge projects and take months to complete. But I would love to be surprised by another record year. And I will keep you abreast of progress here as it is made in the weeks ahead.

Onwards in the Sustainable Energy Transition-

Output falling to meet lower demand

The petroleum report showed crude oil inventories fall closer to the average range, with its fifth straight week of significant decline. This slide has been largely driven by lower imports. A drop in US crude output is also helping to restore some balance – production is now ~5% lower (~.3 million barrels per day (Mbd)) than its highs during the Spring.

However, petroleum product inventories remain high. Gasoline increased to high levels as demand remains down 1.3% from last year. Distillates (mainly diesel) and propane also increased last week, with distillate demand down a huge 28.9% from 2008. Continued weak demand has sent crude prices down more than 15% from their early July highs and has gasoline falling back below $2.60 per gallon nationwide after almost touching $2.70 a couple weeks ago. As I wrote last week, it will take a marked drop in output or recovery in demand for prices to hike back up significantly in this prolonged recession.

A similar story for natural gas

The weekly natural gas storage report conveyed a similar story. Low prices have lowered output and induced a greater consumption of natural gas for electricity generation (substituting coal). These shifts are slowly returning inventories to balance, as inventories are now 19% rather than 23% above the historical average. It will take months of suppressed prices (and thus lower output) before the surplus subsides.

Prices to mirror recovery

Economic stability is necessary to bring real balance to fuel inventories and lift natural gas and oil prices. These lower costs can help consumers get their finances back into balance before the age of efficiency and renewables really kicks in a few months from now.

Onwards-

US & Europe Details

In the US, the average price per watt for a single module fell 1.1% or five cents to $4.56 per watt. This price is 5.4% below last year, but remains ~5% higher than the record low reached in 2004. In Europe, the average price fell .9% or four cents to 4.44 euros per watt. This price is a new record low and 5.5% below last year.

In kWh, the price for industrial solar electricity fell .8% or .16 cents to 20.4 cents per kWh. Prices are now the lowest since October 2004 (almost five years) and only .5% from the record low set in June 2004. We should see a new record low by the end of the summer based on current price trends.

Keynesian Price Stickiness

Prices on the individual retail side aren’t falling as quickly as the wholesale numbers I wrote about yesterday: ~5.5% vs. 40+%, respectively. Longterm contracts and general Keynesian price stickiness will eventually shakeout and the lower equilibrium will emerge by the end of 2009/beginning of 2010. And a quick note: these survey prices are per individual module. Average customers generally buy multiple modules that integrate into panels, so the price per watt for most projects is discounted for the bulk purchases to currently below $3 per watt. Still, the Solarbuzz price survey is useful as a comprehensive view of the individual retail sector and gives insight into the trends of the whole industry.

I’ll let you know as further developments occur.

Onwards in the Sustainable Energy Transition-

Oil Output Slides Slower than Demand

Oil demand is down more than 5% in 2009 thus far and shows few signs of change. The Energy Information Administration (EIA) Petroleum Weekly Report shows demand of most oil-based fuels nosediving. Gasoline, distillates (mostly diesel), and propane demand fell 3.2%, 24%, and a whopping 39%, respectively. As a tempering force to supply gains, US crude output slid 1.8% to 5.163 Mbd last week, just .8% higher than in 2008. Much further reduction in production could bring US stockpiles back into the average range and threaten to lift prices above $70 per barrel again. But more economic stability is necessary to raise prices much further.

Natural Gas Storage Finally Slows its Growth

It took sub-$4 per MMBtu and a heat wave across the South to finally keep natural gas inventories from its above average growth. Output may fall below 2008 levels in July and send prices back above $4. But again, some economic recovery is important for prices to climb significantly above $4.50 per MMBtu. Storage remains more than 20% above average, and is poised to hit new record levels by October. Natural gas will remain a strong substitute for coal this summer even though coal prices are half their 2008 average.

Low Energy Demand Means Slow Renewables Growth

It’s hard to justify strong demand for new renewable energy when overall energy demand remains significantly below 2008 levels. But if solar and wind producers can continue to lower costs and economic recovery picks up in the second half of 2009, we may be on the cusp of another wave of strong expansion.

Bottom line: The recession maintains its grip on fuel prices midway through 2009. Whether demand recovery, output decreases, or changes in the exchange value of the dollar will change that reality in the months ahead is difficult to know. I’ll keep you posted on these trends and their influence on greenhouse gas emissions in the weeks ahead.

Onwards in the Sustainable Energy Transition-

• RPS: 20 percent by 2020
• Renewable energy and energy efficiency industries receive 9.5 percent of carbon allowances
• Transmission: regional transmission grid planning and federal siting authority
• 20-year Federal Power Purchase Authority
• Establishment of a Clean Energy Deployment Administration to aid the domestic development and deployment of renewable technologies including solar.

These folks aim to foster a new image for the financial capital of our country. They aim to be leaders tackling climate change and empowering an energy revolution.

The American Council On Renewable Energy (ACORE) is convening a gathering of financial muscle for the second year, entitled the Renewable Energy Financial Forum (REFF). Last year, over 600 participants came to REFF Wall Street. This year, a similar number are filling the elegant Waldorf rooms to strategize a resurgence of renewable energy finance.

Even though markets continue to struggle, the conference started with positive energy this Tuesday morning. Leaders from finance are discussing how the negative trends of 2009 can make way for robust growth in 2010 – building on the positive news emerging such as bicycle sales and lower prices for solar.

The first speaker was Undersecretary of Energy Kristina Johnson. She represented a goal-oriented DOE that is aggressively interested in tapping into the vast latent renewable resources throughout the US. She put forward goals for wind and solar power to make up 21% of US electricity in 2030 (15% and 6%, respectively). She also focused on the potential for hydropower to grow from its ~6.5% share by adding turbines to lakes that are currently solely for recreation and water supply.

International Energy Agency head, Nobuo Tanaka, called this renewable energy transition necessary to properly address the urgent climate crisis from business as usual energy consumption. He believes current US federal legislation to lower emissions 80+% by 2050 is in the range of what is needed to achieve a safe greenhouse gas concentration of 450 ppm (parts per million in the atmosphere).

The head of ACORE, Michael Eckhart, estimates that such DOE renewable energy growth goals will take $1 trillion in finance over the next two decades to come to fruition. That huge prospective capital flow is why we have standing room only filling the main ballroom. The panelists are hopeful that the current freeze in capital markets will recover by mid-2010. Cards are beings swapped, relationships are beginning, and these industry leaders have better information to lead their institutions to successful renewable energy deployment in the years ahead.

It will take a while for Wall Street to change its image from unchecked greed and rapacious industry. But gatherings like REFF can help empower an ethos of environmental stewardship and climate responsibility into the community.

I’ll keep you updated on how the conference develops over the next two days. Here’s hoping participants are able to figure out and share innovative financing methods that can continue to lower renewables’ cost and help these cleaner sources substitute dirty fossil fuels in our energy system.

Petroleum Inventories Remain Very High

The Energy Information Administration (EIA) reported yesterday in its weekly petroleum report that US crude oil storage fell another ~1% last week. Even so, crude supplies remain more than 10% above average and US output has been rather robust above 5.2 million barrels per day (Mbd). The lower oil rig count in 2009 has yet to lower crude oil production below last year’s levels. Gasoline is the only fuel with below-average inventory levels. And the lower pump price (compared to last year) allowed last week’s gasoline demand to rise 1.1% above the same week in 2008. But demand for distillates (mainly diesel) and propane continued to languish at recessionary low levels — 16.9% and 10.2% lower than last year, respectively. Either further demand recovery or lower output and imports are necessary to drive significant price increases from current levels.

Natural Gas Inventories Sky-High

And the storage level for natural gas has kept prices close to their recent lows below $4.50 per MMBtu. Even though natural gas is substituting coal for electricity generation across much of the Southeast, lower industrial demand and persistent high domestic production have storage levels moving toward record highs. Inventories are almost 23% above average and continue to surprise analysts with its weekly growth.

Higher Oil Prices Spur Hope for Alternatives

Bicycling, pedicabs, solar and wind power, and other alternatives to fossil fuel energy are benefitting from the return of higher oil prices. Oil is now more than double its winter low below $35 per barrel. If non-OPEC output begins to wane in the weeks ahead and the recession does begin to fade, these alternatives may surge forward quickly. I’ll keep you updated on progress in the weeks ahead.

Onwards in the Sustainable Energy Transition-

Prices fell faster than costs

In the first quarter, the average selling price (ASP) of solar modules fell like a rock. Meanwhile, solar producer costs fell less quickly. For instance, China Sunergy reported its ASP fell 45% from $2.97 in the fourth quarter to $1.64 per watt! This price is 50% below their first quarter 2008 price. Sunergy took a loss of $8.8 million as its costs fell a slower ~37% pace.  They estimate a return to profitability in the second quarter on lower costs (since most of their residual high-priced polysilicon has been cleared from inventory).

Lower Polysilicon Cost Allowing Profit at $2 per Watt

Polysilicon production has now more than caught up with demand.  And major polysilicon producer, Michigan-based Hemlock Semiconductor, just announced yesterday the ahead-of-schedule completion of a plant to make an additional 8,500 tons of polysilicon per year (a more than 10% increase in its global supply). The spot price of polysilicon is reported to have fallen more than 60% from last year to as low as $65 per kilogram. Such a low polysilicon price brings silicon-based solar producers back into competition with thin-film players like First Solar moving forward.

Shipments likely to grow in second quarter

Many companies are not only predicting a return to profitability in the second quarter, but an increase in sales. For instance, Trina Solar expects to ship 23-33% more modules April-June (60-65 MW vs. 48.8 MW in the first quarter). Overall, 2009 may be a repeat of 2008 capacity growth levels ~6 GW, but revenue will be significantly lower. As long as solar producers are successful at reducing costs, the future is beginning to get bright again for industry growth.

Within a few days, I’ll share the early June tally for solar prices. And we’ll get a sense of how quickly this climate-friendly energy source can get competitive with the fossil fuel-fired power plants that dominate today.

Onwards to Sustainability-

Today, the oil price convincingly passed $60 per barrel as the dollar fell to $1.377 per euro (10% weaker than its peak several weeks ago). Oil had previously touched $60 before retreating during the last few days. But this time, a weekly report from the US Energy Information Administration (EIA) showed a larger drop than expected in US inventories of crude oil, at 2.1 million barrels or .6%. This drop followed a bigger 1.2% drop the week before. Therefore, even though oil storage levels remain above average, the emerging trend of decline has caused speculators to bid the price up.

Gasoline May Spike to $2.50

Gasoline storage levels fell 2.1% to below the average range, its second big drop in as many weeks. With prices now at $2.33 per gallon and wholesale prices that translate into $2.50+, we are likely to see a continued spike in gasoline’s price in the week ahead. In fact, without extremely bad economic news derailing the rally – average gasoline prices seem destined to rise above $2.40 and toward $2.50 soon.

Lower Imports & Lower Demand

Crude oil imports averaged less than 9 million barrels per day (Mbd), down more than 5% from last year. But this still isn’t a problem for the short-term because inventories are so high and recessionary demand remains more than 5% below 2008 levels. Last week’s demand for gasoline, distillates, and propane fell 1.4%, 13% and 4.7%, respectively. The timing and speed of economic recovery along with the pace of oil field decline rates will determine prices going forward.

Fuel Efficiency Crucial

Obama’s announcement yesterday to raise fuel efficiency standards in the US market to 35.5 mpg by 2016 was a great step forward. The Union of Concerned Scientists estimates this policy will save Americans at least $30 billion dollars per year (reduced gasoline expense, etc.) in 2020 based on a gasoline price of just $2.25 per gallon. The efficiency standard will also lower our oil import needs by 1.4 million barrels that same year (enough to replace dwindling shipments from Mexico).

Bottom Line: A focus on efficiency will be crucial to keep our economy from suffering an even worse oil shock than 2008 in the years to come. This same efficiency is a big part of the climate mitigation effort we need to deploy in the US and worldwide. Solid policy like strengthened fuel efficiency standards accelerate the Sustainable Energy Transition, helping our environment and our wallets simultaneously.

Onwards-

photo from PC World

I mentioned back in April that solar-powered cell phones are coming out this summer. Well, now there’s talk of solar netbooks emerging as well. Spanish producer iUnika will begin to sell its first solar model, Gyy, in June.

A Step Forward

Since a regular laptop uses more power than a few small solar cells can provide, the Gyy has less features and capabilities than today’s average and runs on linux. Even so, the model is the beginning of further progress to make the mobile information revolution sustainable in a carbon-constrained world.

Further Efficiency Needed

Falling prices for solar in the coming months will make solar devices much more commonplace and will drive further improvement in the technology. Since space matters on a small laptop, the solar applied to such devices will likely be the more efficient (~20%) silicon-based modules from companies such as Sunpower. Technological advances are needed in two directions — increasing the energy efficiency of laptops and their applications as well as continuing to increase solar cell efficiencies toward 25% and beyond.

Onwards in the Sustainable Energy Transition-