Modern Energy Monthly - Volume 1, September 2011

Editor's Note

On December 31, 1992, hundreds of people in the town of Göttingen, Germany, poured out into the icy-cold streets.

It was New Year's Eve and as is tradition there, neighbors bundle up, head outside and greet each other with a joyous “Freues Neues Jahr.”

I absolutely loved it. Complete strangers were coming up and hugging me, wishing me a happy New Year. One astonishingly gorgeous Persian girl with a very thick accent even planted one on my booze-soaked lips before telling me that she wanted to make sure this was a New Years I would never forget.

Certainly I have not forgotten, and it is likely that this memory will stay with me throughout my entire life. (Of course, the next morning wasn't quite as fun. Those memories have stayed with me as well.)

After drinking bottle after bottle of cheap sekt and eating little more than smoked meats and cheeses the night before, I took refuge in a bathroom that fortunately smelled of the perfume I had inhaled most of the night from my new Persian friend... and it was pleasant. The war going on in my intestines, however, was anything but pleasant.

But by early evening — and a handful of antacids later — things were starting to clear up. I had a few cups of coffee, some brotchen and jam, and jumped on the night train that would get me to Paris by morning.

I spent most of the train ride going over and over the previous night in my head. It was a once-in-a-lifetime opportunity that would now be nothing more than a fantastic memory. And I was grateful for it. But if I were to try to relive it, it would serve only to frustrate me.

It was from that very experience I learned an important lesson: Enjoy every moment, because once it passes, it becomes nothing more than an illusion.

And this holds true for everything — including energy markets.

The Past is an Illusion

There's no denying that, for decades, we have enjoyed tremendous growth thanks to the easy availability of cheap energy sources. Oil and coal specifically powered our nation and helped turn this country into a superpower.

And over time, we have come to rely on these sources nearly as much as we rely on food and water to survive.

Today, we can look back and be grateful for those resources that enabled the United States to become so powerful. But we also must face the reality that our vast supplies of cheap energy no longer exist. Those days are over. They are in the past, and the past is an illusion.

Of course, this is a reality that may still be lost on the masses and law-makers who take their cues from campaign contributors. But for savvy investors, this is a reality that serves as an indicator of where our next round of profits will come from.

This is why I started Green Chip Stocks back in 2005. I saw the writing on the wall, and I knew it was only a matter of time before the transition to alternative energy would begin.

My timing was perfect. Since launching Green Chip Stocks, we have helped investors pull off triple-digit gains, time and time again, by playing alternative energy stocks. And it just keeps getting better...

In fact, because the face of modern and alternative energy is transitioning so rapidly, we're seeing more and more opportunities come across our desks every single day.

Whether new technologies, new deals or new discoveries, there really has never been a better time to profit from the rapid transition of the global energy economy.

And I want to make sure you have every opportunity to get a piece of the action. That's why I've just launched Modern Energy Monthly.

Modern Energy Profits

Over the years, little has given me more satisfaction than helping our readers get rich.

(Yes, I fully admit that part of it is ego; but I really do enjoy the opportunity to help investors profit from the earliest stages of alternative energy development.)

And this is a trend that will continue for many years to come...

So to make sure you have every opportunity to profit from this trend, once a month I'll be sending you all the latest developments in the world of modern energy. From the big money deals and government action (or inaction) to new technological developments and new stocks that are absolutely crushing it... if it's going to lead us to profits, you're going to read about it first.

So welcome to the Modern Energy Monthly.

Now let's make some money!

A $1 Billion Play on Wind

August wasn't even a day old when we got word that ABB (NYSE: ABB) had landed a $1 billion order to supply a power link connecting wind farms in the North Sea to the German grid.

But before we dive into this deal, let's take a step back and discuss the bigger picture here...

On May 30, Germany's lower house of parliament approved the country's exit from nuclear power by 2022.

Despite claims that shutting down those nuclear facilities would “imperil the power supply of Europe's biggest economy,” Chancellor Angela Merkel got her wish — and those power plants have a little more than ten years left.

Reading about the decision, I found the following quote from Chancellor Merkel to be the most important part of this whole thing:

“This is more than consensus for a nuclear exit, this is consensus for a switch to renewable energy. We want to remain an industrial nation and sustain growth. But we want to organize that growth so that we guarantee quality of life for coming generations as well. Solar, wind and biofuel technology will provide the key.”

Now prior to this announcement, lawmakers had voted to maintain Germany's current subsidies for offshore wind. Quite frankly, they don't have much of a choice if they're committed to reaching the very aggressive goal of 25 gigawatts over the course of the next 20 years. That's the equivalent generating capacity of about 18 to 20 nuclear power plants, and is necessary if Germany expects to reach its renewable energy goals, which are as follows:

• 35% by 2020

• 50% by 2030

• 65% by 2040

• 80% by 2050

These goals are not unreachable, but they are about as aggressive as they come. And they cannot be reached without significant offshore wind capacity.

Now with more support behind offshore wind, there are two specific companies that will benefit. The first is ABB, because when it comes to facilitating the transmission of offshore wind power, ABB runs the show.

The company has practically zero competition, and it prepared early for the coming demand in submarine power cables. Whether connecting island wind generation in Hawaii or connecting offshore generation to national grids, chances are, ABB's doing the connecting.

The second company to benefit quite nicely from Germany's aggressive offshore wind energy plan is Siemens (NYSE: SI). Siemens will get the bulk of the offshore business in Germany, as the company is already one of the leading offshore wind farm suppliers.

Plus it's a domestic play that the German government will likely show preferential treatment. In fact, 80 Siemens turbines will power Germany's largest offshore wind farm, Meerwind. When completed, Meerwind will supply electricity to about 400,000 households.

Siemens was actually the first to install an offshore wind farm back in 1991. Those 11 turbines, which were installed in Denmark, are still operational today. Currently, the company has an installed offshore capacity of more than 600 megawatts.

Incidentally, the most recent projections for European Union wind power show the industry tripling by 2020. According to the latest data (which will be published in the European Commission's Energy Roadmap 2050, due out before the end of the year), electricity production from wind power in the EU is expected to increase from 5.5% to 15.7% of total EU demand in about 8 years.

By 2020, wind-generated electricity in the EU will be the equivalent to the total electricity consumption of all households in France, Germany, Poland, Spain, and the UK combined.

Nuclear Gets a Makeover

Although few countries balked on nuclear after the Fukushima disaster, there should be little doubt that Germany's nuclear power production will soon find a place only in the history books.

Switzerland has shown that it also plans on phasing out all of its nuclear power plants. But the last of those won't be decommissioned until 2034.

Elsewhere in the world, nuclear may have hit a speed bump, but it's not going the way of the typewriter. In fact, if you cancel out all of Germany's nuclear power plants, 424 still remain. Moreover, another 60 reactors are being built across the globe.

As an advocate of clean energy, I've never been a fan of nuclear. There have just been too many close calls over the years, and no one has any idea as to what to do with all that nasty waste. So it sits there, all over the world, presenting enormous environmental hazards.

That being said, my personal opinion about nuclear has zero influence on the industry or how the world views this power source. And while I'll never offer my support to nuclear expansion, I certainly won't let my politics interfere with my coverage.

Bottom line: There's plenty of money to be made in nuclear. In fact, because of the Fukushima crisis, the nuclear industry has been tripping over itself in an attempt to find new technologies that offer “safer” nuclear power production.

As I wrote in Energy and Capital earlier this year, beryllium is going to make this happen. And my colleague Nick Hodge has been making a killing by playing one particular beryllium company that's giving the nuclear industry a big-time makeover.

By utilizing this company's beryllium oxide, the nuclear industry can alleviate safety concerns, reduce radioactive half-life, and save billions in operating costs. If you haven't already, I strongly suggest checking out Nick's analysis on this company here.

Rising Suns and Chinese Winds

Say what you will about China, but when it comes to bolstering renewable energy growth, the Middle Kingdom is wasting no time in flexing its solar and wind muscles.

This past March, China announced its latest five-year plan that set a goal of 20 percent renewable energy by 2020. Already outpacing the U.S. as the largest market for wind power capacity, China is looking to do the same with solar.

While China is already the world's largest solar panel manufacturer, in a matter of years it could be the largest consumer as well — thanks mostly to a new nationwide feed-in tariff that's expected to launch the country's total installed solar from less than 1 gigawatt today to 10 gigawatts in about three and a half years.

This is a huge jump and will likely help some of the major solar players silence the critics that claim an industry-wide glut will sink the solar market.

Most of the glut fears have been overblown anyway as U.S. solar installations have experienced significant growth that has helped take some of the pressure off the European market, where very generous subsidies are now being phased out.

I would also add that China's in a much different situation, as its interest in solar has little to do with the environment and everything to do with the fact that its current energy mix is insufficient to meet demand. China needs every watt it can get. And 20 percent of its demand will be met by renewables (particularly solar and wind) in less than ten years.

This is a very big deal and will offer a steady shot of steroids to Chinese solar manufacturers over the next two to three years: Trina Solar (NYSE: TSL), Yingli (NYSE: YGE) and JA Solar (NASDAQ: JASO) are names you should know.

Also bolstering Chinese solar companies will be a burgeoning solar market in Japan.

In an effort to integrate more domestic resources in the resource-poor nation of Japan, the Japanese government moved in August to approve a new bill that will require utilities to buy any amount of electricity generated from solar at a preset rate for up to 20 years.

According to Trade Minister Banri Kaieda, the bill is expected to help solar capacity grow from roughly 40,000 megawatts to 100,000 megawatts. That kind of growth would amount to about six times Japan's solar panel sales in 2010.

Although domestic solar producers will be called upon first, those domestic operations simply don't have enough capacity to meet demand. As a result, low-cost Chinese manufacturers will benefit.

My Car Gets 261 Miles Per Gallon!

Well, maybe not just yet...

But delivering more than 261 miles per gallon is not an illusion.

Earlier this year, Volkswagen unveiled a two-seat plug-in hybrid at a car show in Qatar.

The vehicle, known as the XL 1, was touted as having a driving range of 261 miles per gallon. And although it'll only get you about 22 miles in all-electric mode, the design of the car allows for some pretty impressive fuel economy.

With a two-cylinder diesel engine and the extensive use of carbon fiber in the body, the 2.6 gallon fuel tank will give you a driving range of 341 miles.

All in all, this is beyond impressive. So needless to say, I'm extremely excited to see what the German automaker shows off this month when it unveils its latest experimental car in Berlin. Apparently, this thing is supposed to be even better than the XL 1. We don't have any data on the car's range or top speed just yet, but it's coming. Keep an eye out for it!

In the meantime, if you're unsure of how the market for electric vehicles is going to shape up, market intelligence firm Pike Research recently published a new report entitled “Electric Vehicle Market Forecasts.” The results are promising for electric vehicle supporters and upsetting for the naysayers who love nothing more than to predict the downfall of what will soon prove to be the most disruptive transition in vehicle design since the first Model T rolled off the assembly line...

According to the report, global electric vehicle sales will reach 5.2 million by 2017. And cumulative sales of hybrid vehicles will represent an additional 8.7 million, giving us a combined total of 13.9 million vehicles in the “electrified” vehicle categories.

A 19.5% CAGR is expected between 2011 and 2017. In comparison, a 3.7% CAGR for the overall vehicle market is expected during the same time.

Interestingly, Pike reported that the Asia Pacific region will be the leading market due to the strength of the Japanese market for these vehicles and growth in China in the coming years.

Following up on the electric vehicle report, Pike released a forecast which suggested that by 2017, a total of 7.7 million electric vehicle charging locations across the globe will be available. (That number does not include standard electric outlets that are already in place near parking spots; researchers only looked at equipment with safety features for plugging in electric vehicles.)

In an earlier report, Pike listed the top 10 vendors in the electric vehicle supply equipment market. They are as follows:

• Coulomb Technologies
• ECOtality (NASDAQ:ECTY)
• Elekromotive
• AeroVironment (NASDAQ:AVAV)
• General Electric (NYSE:GE)
• Siemens (NYSE:SI)
• Eaton (NYSE:ETN)
• Leviton
• Clipper Creek
• GoSmart

Beyond Pike's research, market research firm Zpryme released a report that indicated the electric vehicle charging infrastructure and services market will grow from $776.8 million in 2011 to $4.45 billion in 2016. Not too shabby!

In 50 Years, Solar Becomes King

On Monday, August 29, the International Energy Agency (IEA) announced that by 2060, solar generators may actually produce the majority of the world's power.

Moreover, the IEA suggested that wind, hydropower, and biomass will likely supply much of the remaining generation as the global economy shifts away from fossil fuels.

Based on the IEA's projections, most heating and transport will switch from dirtier fossil fuels to cleaner electric power, and CO2 emissions from the energy sector would fall to about 3 gigatons per year, compared to 30 gigatons in 2011.

Also released on Monday was a new Greentech Media report which showed that the U.S. solar industry was a net global exporter by $1.9 billion in 2010. That's huge!

The report also indicated that $4.4 billion of domestic revenue accrued from U.S. solar installations. (That's billion with a "b".)

That's it for this month's Modern Energy Monthly.

There's plenty more to come. And of course, we'll continue to provide you with the latest developments in alternative and modern energy in Energy and Capital.

You can also become a member of Green Chip Stocks to get regular alternative energy updates, special reports, and stock picks. Click here for instant access.

To a new way of life and a new generation of wealth...

Jeff