Oil & Gas

The latest on oil prices.....................................................................................................3

What does the oil price depend on?...........................................................................4

Peak oil or when oil becomes too expensive..........................................................5

3 Fundamental Reasons why Peak Oil is Good for the investor........................6

Is Oil and Gas a Profitable Investment?.....................................................................7

Is Oil and gas a Safe Investment?.................................................................................8

The Best Ways to Invest in Oil and Gas.......................................................................8

Renewable Energy
Why now?.............................................................................................................................9

Politics & Business: a perfect combination...............................................................9

Is it real?.............................................................................................................................. 10

Emerging energy trends.............................................................................................. 11

Wind Energy Trends: Returns that Will Blow You Away..................................... 12

Energy Storage: The Next Big Trend......................................................................... 13

Next Generation Bio-Fuels.......................................................................................... 16

 Many people have become concerned about the
future of oil, coal and natural gas. Astute investors
are already enjoying substantial rewards from these
sectors and beginning to look ahead as these non
renewable energy sources will not be available
forever and alternative sources of renewable energy
will need to be found within the next 10 years.
Energy is not an option. Fossil fuels supply over 86%
of the world’s energy. An abundant supply of oil
and natural gas remains vital in helping us and the
industrialized countries of the world maintain and
establish a way of life.
The purpose of this Emerging Energy review is to
help potential investors to not only understand
the fundamentals of oil & gas investing but to also
provide solid and detailed information regarding the
- at times confusing - renewable energy sector.
We are on the ground floor of the first generational
megatrend of the 21st century. It is nothing short
of reinventing and replacing the infrastructure
powering our world. The opportunity is huge, but
not all technologies and companies will make it,
or reward the investor. The renewable investment
landscape is complex and constantly shifting with
technology advances and new regulatory incentives.
In fact, the renewable energy investment space
is extremely fragmented and chaotic. Some
technologies are mature and fully developed.
Some have peaked and are on the decline. Others
are decades away. The transition from a fossil fuel-
centric economy to one powered by clean renewable
energy is going to be all but smooth and orderly. It
will be disruptive with more energy crisis and wars.
There will be big winners, and big losers. The biggest
challenge the investor faces is choosing between all
the many opportunities.

2
Oil & Gas
When it comes to natural resources, oil remains one of
the most hunted assets on the plant. It is fundamentally
linked to the economies of both the developed and
emerging markets of the world and can simultaneously
be an indicator for economic health and a driver of it - as
we are so dependent on it.
It is also one of the most volatile commodities available
to investors.
Take 2008 as an example, where after crashing through
the $100 barrier at the start of the year, by July, the price
of Brent Crude had rocketed to a high of $144.95 per
barrel only to subsequently crash back down to earth,
to a 12-month low of just £38.12 – a staggering 74%
collapse.
Oil, often dubbed ‘black gold’ like many other
commodities, such as gold, platinum and corn, has
traditionally a low correlation with equities, meaning oil
and oil related investments in a portfolio can provide a
healthy element of diversification, as well as a hedge
against inflation.
Oil and companies linked to oil have a decent track
record of outperforming most equity benchmarks during
downturns when stock markets are perceived as being
weak; however, this may not always be the case in the
future.
Again, like other commodities, the price of oil is
intrinsically linked to the basic economics of supply and
demand.
The rapidly developing markets of the world are driving
up demand. Take China, which delivered the largest
demand increase in 2009, up 7.2%, and demand there
has been rising every year since 1993, a trend which is
not expected to dampen over the long term.
From a supply perspective, oil discoveries have steadily
been falling since reserves peaked in 1980 but the world is
not exactly running out either, at least not in the near term.
Some would argue that the world is edging ever
more nearer to a ‘Peak oil’ environment, where global
productivity reaches its maximum rate. The basic
argument is that the world’s oil supply is likely to come
short of fulfilling global demand, which is unlikely to
falter in the short term.
The latest on oil prices
After its spectacular boom and bust in 2008, oil like
many other commodities, is once again on the rise. A
few months ago crude broke the $50 barrier, and has
continued on its bull run.
The first half of 2008 (pre-crisis) saw a super-spike in
commodities, led by oil. Crude rocketed to $147 by July
of that year. The rally was based on:
• Soaring demand from China et al
• Dwindling petroleum reserves
• Increased unrest in the Middle East
• Increased pressure from oil speculators
(read more on this below).
In common with most other assets, the price of oil then
tumbled for the rest of the year, bottoming out below at
a little above $30.
Put simply, the oil importing countries – the UK,
U.S. and most of the world - were flying less, buying
fewer cars and spending less on imported products.
The slowdown in the global economy, as credit to
consumers and businesses dried up, has hit demand
hard. Falling car sales and reduced airline traffic as
consumers tighten their belts has meant less demand
for oil. The drop off in demand, while predicted to
happen, came much sooner and sharper than most
economists expected.
The price of crude however has begun to rise - doubling
from $31 a barrel to around $70 - as optimism has grown
for an economic recovery and therefore a rise in energy
demand. It has since levelled off, with rumours of
lingering surpluses and over-supply in the global market.
However, oil inventories in the US are beginning to
decrease which should start pushing demand later this
year and with China continuing to display a healthy thirst
for oil, there is cause for optimism for investors.
3
 What does the oil price
depend on?
The price of a barrel of oil is the result of a number
of competing factors: How much oil is available, how
much oil is demanded by consumers, how much it costs
to get oil from the ground to the consumer, the price of
dollars and the potential that oil speculators see for the
price to rise and fall.
Many of the long-term global trends point to steady
increases in the price of oil. Reserves are finite so the
commodity is slowly becoming scarcer, something that
pushes the price up.
The explosion of development in countries like China
and India has created more demand as those and other
developing regions industrialise. They build more roads
and increase manufacturing, all of which requires oil.
The bearish argument is that technological new energy
developments - solar, wind, etc - should begin to reduce
the world’s dependence on oil.
Supply is fettered by the countries that export it. The
Organisation of the Petroleum Exporting Countries
(OPEC) meets regularly to set the amount they are
willing to release onto the market. OPEC oil accounts
for approximately 35m of the 80m barrels released onto
the global market each day.
OPEC can reduce output as a means to push prices
80
70
60
Annual oil discoveries minus annual
consumption (billions of barrels)
50
40
30
20
10
0 4
–10
–20
1950
Discoveries greater than consumption
Consumption greater than discoveries
4
higher and can increase it to meet greater demand. It
is tempting to think that all the producers are motivated
simply by a high price. In fact, for some countries it may
be beneficial to have a lower price if it means they can
maintain, or increase, the volumes they sell.
Oil is priced in dollars so movements in that currency
also impacts on crude. The weaker the dollar, the higher
the dollar price of oil because it takes more dollars to
buy a barrel.
There is one more factor that is thought to influence the
price of oil. It is possible for investors to speculate on the
price of oil by purchasing futures contracts. Investors
who include investment banks, hedge funds or pension
funds, will buy a quantity of oil to be delivered at a future
date. If the price of oil has risen by the time the contract
is delivered, the investor makes money. It became a
contentious issue in 2008 when critics alleged that this
type of speculation helped to push the price of a barrel
to a record $147.
However, investors have defended the process,
arguing that speculation does nothing to reduce the
actual amount of oil on the market, which would push
the price up, and that other commodity markets have
shown greater increases than the oil market with no
price speculation.
EXPLORATION / DISCOVERY / CONSUMPTION
12
11
10
Exploratory drilling “wildcats” (thousands)
9
8
7
6
5
3
2
1960 1970 1980 1990 2000
Source: Association for the Study of Peak Oil,
www.asponews.org
Peak oil or when oil
becomes too expensive
That oil supplies will run out one day is inevitable. New the norm our oil-dependent, long-distance lifestyles
sources of oil are proving too expensive to extract when will become untenable. Triple-digit oil price will be the
each barrel is trading at less than $100. norm, China will no longer be the source of cheap goods
as manufacturing moves back home, suburbs without
But once we’re out of recession, the price of oil can
public transport will become ghost towns. Many
only go one way. Up. A long way up.
proposed sources of alternative energy are as yet still
Our civilisation depends on cheap oil, without it our in their infancy.
way of life will grind to a halt. As high prices become

EXPLORATION / DISCOVERY / CONSUMPTION

MIDDLE EAST: 64,5% 124.325.000.000 (VENEZUELA 6,8%)

• SAUDI ARABIA 37,8%

L. AMERICA: 11,5% 124.325.000.000 (VENEZUELA: 61,8%)
• IRAQ 37,8%

AFRICA: 8,9% 95.461.900.000 (LIBYA: 38% / NIGERIA: 36%) • KUWAIT 37,8%

• IRAN 37,8%
E. EUROPE: 6,2% 67.159.700.000 (FORMER USSR: 97,2%) • UAE 37,8%
• QUATAR 37,8%
ASIA / PACIFIC: 4% 44.390.500.00 (CHINA: 54%) OMAN 0,9%
SYRIA 0,4%
OTHERS 0,6%
N. AMERICA: 2,8% 30.491.000.000 (US: 71,4%)
• OPEC MEMBER

W. EUROPE: 2,0% 21.065.600.000 (NORWAY: 62,4%)

OPEC REGIONS
MEMBERS’ TOTAL
SHARE RESERVES

Source: O
 PEC Annual Statistical Bulletin, Table 10 and 33
www.opec.org/publications/AB/pdf/ab002000.pdf

5
 3 Fundamental Reasons
why Peak Oil is Good
for the investor
1  ising depletion, growing
R 2
consumption
• [In 1983] the world consumed 58m barrels per day
and China consumed just less than 2m barrels per
day. Today the world consumes some 86 million
barrels per day, of which China consumes 7m
barrels
• Discovery of new oil fields peaked in 1966 and has
been falling ever since.
• What the oil companies do not reveal is that every
year the world oil industry loses almost 4m barrels
per day in production. This means that the industry
has to find roughly 20m barrels per day of new
production over the next five years to replace
what is lost. Currently, they are pumping about
three times more than they are finding. This is an
important indicator for higher oil prices down the
road.
• Thesceptics may not agree, but at $60 to $90 per
barrel, many of the world’s largest energy mega-
projects, such as the Canadian oil sands, will not
go ahead because those prices will no longer
provide a sufficient economic return.
3 No vehicles and oil above $200
6
 orth Sea oil production:
N
a sign of things to come
• The North Sea flooded the world with oil and Great
Britain with petro-wealth when the giant Forties
and Brent oil fields came online in 1975. But only
a couple of decades later, production rates were
dropping like a rock.
• Bythe 1980s the oil companies had already spent
more on drilling technology in the North Sea than
NASA spent putting a man on the moon. But the
North Sea wells had their best monthly production
numbers in 1985. Their peak annual production
came in 1999, and had dropped off by 43% by
2007.
• Whilenot long ago the UK was an oil exporter,
today it is a net importer. And that process is
repeating itself worldwide.
• From the North Sea to Mexico, to the U.S. and
from Russia to Indonesia.
• Oilconsumption in the United States has gone
from 15m barrels per day in 1970, back when
American oil wells were still fueling American cars
and trucks, to almost 20m today. This is the same
the World over.
• Consumption is up 63% and 74% respectively in
Australia and New Zealand. When consumption
is up and supply is down, it is hard not to worry
about tomorrow’s oil supply, and the implications
for tomorrow’s economy as well.
• In August 2008, when oil prices peaked, Americans
drove 15bn miles fewer than the previous August,
the largest drop since the government started
collecting data in 1942. But demand is not going
to stagnate forever.
• What happens to oil prices when the economy
picks up again? Simple. Once the dust settles
from the various crises rocking financial markets,
we are looking at the same basic demand-supply
imbalance... that took us to nearly $150 per barrel
before the recession.
• In the next cycle, the same imbalance will probably
take us to $200 per barrel before another recession
temporarily knocks prices back prices and demand.
Is Oil and Gas a Profitable
Investment?
Yes. Oil & gas can be a very profitable investment. After
all, some of the largest companies in the world are oil
and gas companies.
Investing in oil and gas can be accomplished in many
ways; from purchasing stock in large public companies
to participating in private, independent projects. You can
invest in oil and gas exploration, refineries and service
companies and you can invest through mutual funds or
derivatives such as commodities futures.
All of these investment areas in oil and gas are potentially
profitable. However, as an investor you should try to
analyze their varying degrees of risk and reward.
One of the first factors of investing properly is trying
to determine what your investment goals or objectives
may be. As an example, it may be that you are looking
to receive a 7 to 12 percent annual return. This type of
return can be easily obtained with the purchase of stock
from most of the well-known major or independent oil
companies.
Or, you may be looking for a rate of return in the 20 to 50
percent range. This can be accomplished by purchasing
stock in aggressive small independents or by investing
with service companies expanding into new markets.
There is also potential to receive much higher rates of
return - some exceed 100 percent - depending upon
your ability as an investor to accept higher degrees of
risk. Investing with independent operating companies
on a direct participation investment is one option. This
is similar to what the major companies do when they
invest with each other in developing projects.
They also reduce their risk by participating with other
oil companies that are located in different geographic
areas. It is not uncommon for oil companies to have
a specific knowledge or infrastructure in different
geographic regions. By sharing in developmental costs,
the companies equally reduce risk and gain potential
reserves by diversifying their risk.
Yes, investing in the oil and gas industry can be very
profitable. However, it is very important to have a good
understanding of the type of programs, their structures,
and your own level of risk. This leads us to the next
question.
7
 Is Oil and gas a Safe
Investment?
Yes. Investing in the oil and gas industry can be a
safe investment. One of the safest investments is to
own stock in what many consider to be “blue chip”
companies known as the “Majors” in oil and gas.
One incentive in investing in a “blue chip” company is
that your level of risk is quite low. As a result, return
levels are also fairly low. However, you will be making an
investment in the oil and gas industry. If this is your main
objective and you’re looking for low risk, this may be a
good and safe investment. On the other side of the coin:
the higher the risk, the greater the return. Again, we
come back to investment objectives and risk appetites.
One way government helps address the issue of risk
is that it allows companies that drill for and produce oil
and gas to offset some of the cost through the use of
tax deductions.
Oil and gas are natural resources that deplete through
extraction. In other words, these are not renewable
energy sources and some tax code may allow a depletion
allowance of up to 15 to 20 percent. In addition to the
depletion allowance, we have intangible drilling costs as
well as tangible drilling costs. There can be additional
tax benefits depending upon what type of category a
particular project falls into.
For example, there are tax credits for drilling tight sands
as well as unconventional reservoirs.
Even though the tax benefits are very helpful in offsetting
some of the risk for oil and gas, no consideration for an
investment in oil and gas should be considered based
on the tax benefits alone.
When investing in oil and gas there are many aspects
of the industry to consider before determining a safe
investment. Three of the main features are:
1 Your investment acumen.
Investment acumen means insight or judgment. In
other words, as an investor you need to have the
knowledge to be able to ask the right questions
and understand what is the right answer. That way,
you will be able to make much better investment
decisions. Safe decisions to invest or who to invest
with are the first prerequisite to profitable investing.
2 I nvestment objectives.
Your investment goals, or potential returns, accompanied
with the appropriate amount of risk that can only be
determined by you, the investor.
3 W
 hat type of investment vehicle?
These vehicles may be stock, an investment fund,
a drilling fund, private placement, commodities
trading, or some combination of all of the above.
8
The Best Ways to Invest
in Oil and Gas
Major Oil Company Stock - All of the major oil companies
that own the majority of reserves throughout the world
are probably traded companies. As an investor interested
in oil and gas, their stock can be considered one of the
safest investments in oil and gas. However, as a general
rule, they do not provide a high rate of return.
Medium-sized Oil and Gas Companies - Many of these
are publicly traded on the New York Stock Exchange, as
well as the NASDAQ and other exchanges throughout
the world. Again, these stocks can offer a higher rate of
return, but potentially have more risk due to the fact that
most of these companies are still acquiring assets and
going through a growth process.
Mutual Funds - These focus their portfolios towards the
energy industry. They may own stock in the majors, stock
in independents or stock in companies that provided a
variety of services for the oil and gas industry. There
may even be some direct participation in oil and gas
development or exploration projects.
Independent Oil and Gas Companies - There are over
8,000 independent oil and gas companies located
around the World. Many of these firms offer the
opportunity to invest with independent producers in
industry development projects as well as exploration.
These direct participation investments are called private
placement and can utilize the full capability of the tax
benefits.
Private placements do offer a much higher rate of return
and can, in most cases, have a much higher degree of
risk.
One important fact to consider is that 90 percent of
wells drilled on an annual basis in the United States for
example, are drilled by an independent oil company.
These producers may vary in size from one-man shops
to multi-level corporations.
Drilling Funds - In the early 1980s, many of the small
independent companies that were publicly held provided
funds that specifically targeted drilling projects.
Most drilling funds can be broken down into two general
categories: 1.) Exploration Drilling and 2.) Developmental
Drilling.
Exploration Drilling is described as the search for oil or
gas more than a mile away from any existing or proven
economic oil or gas wells.
Developmental Drilling is typically categorized as wells
designed to define or extend a proven field or existing
production. This can be a step-out project to define the
productive limits of a reservoir or can be considered in-
field (or in-fill) drilling of a pattern of wells. It can be used
in a waterflood development. Some types of horizontal
drilling are considered developmental due to the fact
that the drilling operations are being conducted in known
reservoirs, thereby reducing the risk. Developmental
drilling offers the highest profit potential of any oil and
gas area, as well as significantly lowering the risk.
Commodities Trading - Oil and gas are traded on a daily
basis in different exchanges throughout the world. Oil
is the commodity that is most commonly referred to as
West Texas Intermediate. This commodity is traded on a
daily basis in contract increments of 5,000 barrels. Even
though you are investing in the oil and gas industry,
or one of the products of the industry, you would be
described as a speculator.
Basically, what you are speculating, is whether or
not the price for a certain commodity will move up or
down. Speculating in oil and gas commodities can be
a very volatile and turbulent market. As an investor,
one should keep in mind that you are speculating in
price movement and not the actual ownership of that
commodity. Commodity trading has an extremely high
degree of risk.
Royalty Funds - Generally speaking, a royalty fund is
when royalty interests are being bought, sold and held
by the funds sponsors. In nearly all leasing situations,
once a lease has been developed, it provides a revenue
stream. A portion of the revenue stream is set aside
for royalty which generally amounts to 12.5 percent and
overriding royalty and/or carried working interest of 2 to
5 percent.
In a royalty fund the objective of the fund is to generate
its revenue from royalties that are held from different
producing fields throughout the country. The main
feature to owning a percentage of a royalty fund is that
the royalty owner (or interest owner) pays no percentage
of operating or developmental costs associated with the
production of the oil or gas. Royalty programs generally
offer a low risk factor along with a relatively low return.
However, their main feature is that these types of
programs last for many years.
Lease Acquisition Funds - The main feature with
this type of fund is that the fund will retain a royalty
for accumulating the leases that it will “turn” into an
operating company. Generally, the funds are used for
acquiring acreage in developing exploration plays. These
types of acquisition programs offer a higher degree of
risk, but can generate a significant return on equity if the
sponsors of the fund are able to turn their acreage to
other exploratory type oil companies.
Combination Funds - These are what they sound
like, a combination of acquisition and drilling funds.
Generally, this type of fund will target a regional-type
oil development play whereby they will acquire existing
properties and then do a developmental drilling program
on the properties they have acquired. These types of
programs generally have a high degree of success and
offer an excellent rate of return as well as providing a
minimal amount of risk.
To properly analyze these investment vehicles, it
is important to devote the time and energy into
understanding the company and its projects.
9
 Renewable Energy
Why now?
The perfect storm is gathering. A number of
unprecedented factors are converging on the renewable
industry as we speak:
• The effects and consequences of greenhouse
gases on the environment are becoming globally
understood
• The end of cheap and abundant Oil & Gas
and other fossil fuels
• Green technology maturation
• National energy independence and economic
security
• Unprecedented government and private funding
We know that just as previous megatrends did (think dot
com) this megatrend will make fortunes for informed
and wise investors. The renewable industry will be
around for decades, but the time for smart investors to
stake their claim and make the big money is now. You
can take part in the world’s energy transformation by
investing in renewable energy sources including: wind,
bio-fuels, biogas, energy storage and solar energy.
Investing today may bring big profits tomorrow.

Politics & Business:

a perfect combination
Nobody can tell which way the wind is blowing like a
politician. This explains why the US Senate recently
turned its attention once again, to major energy
legislation after leaving it on the back burner for a year.
Of course, it took a catastrophe of historic proportions in
the Gulf Coast (BP) to focus their minds, and the minds
of the general public, on the future of energy. That live
video feed of gushing oil is a lot harder to dismiss than
the science of global warming.
So now, while the time is ripe, Congress might slip
through some incentives for research and development
of renewable energy in the US, or at least disincentives
for industries that don’t begin investing in clean-energy
technologies.
The Democratic majority is arguing that a comprehensive
energy bill can unleash massive private investment
in clean-energy technologies, including renewable
alternatives, creating much needed jobs for Americans
in the process. Given the current mood of the public,
it’s possible that some package of carrot-and-stick
measures that make renewable-energy development
more viable will get passed.
10
Regardless of politics however, consider the situation
as an investment opportunity. Is this a good time to
consider investing in renewable-energy industries? For
that matter, do such industries even exist yet, or will
they exist in the near future if America and the rest of
the World gets serious about them?
Here are a few basic facts about renewable energy and
the possibilities for an individual investor.
Is it real?
Right now, somewhere between 6% and 18% of the
global energy supply, depending on which source you
believe, comes from renewable sources -- sun, wind,
water, geothermal, or biomass. So, it’s safe to say that
the industry exists in the real world, but is in its infancy.
Other countries are way ahead of the US in this area.
China is investing heavily in renewable energy and
related manufacturing. European nations have actively
supported their implementation with subsidies for years.
Renewable energy overtook fossil fuels in attracting
investment for power generation for the first time last
year, according to figures released the United Nations.
Wind, solar and other clean technologies attracted
$140bn (£85bn) compared with $110bn for gas and coal
for electrical power generation, with more than a third of
the green cash destined for Britain and the rest of Europe.
The biggest growth for renewable investment came
from China, India and other developing countries,
which are fast catching up on the West in switching
out of fossil fuels to improve energy security and tackle
climate change.
The UN still believes $750bn needs to be spent
worldwide between 2010 and 2013. Counting energy
efficiency and other measures, more than $155bn of
new money was invested in clean energy companies
and projects.
Wind, where the US is now global leader, attracted the
highest new worldwide investment, $51.8bn, followed
by solar at $33.5bn. The former represented annual
growth of only 1%, while the latter was up by nearly
50% year-on-year.
Biofuels were the next most popular investment,
winning $16.9bn, but down 9% on 2009, as the sector
was hit by overcapacity issues in the US and political
opposition, with ethanol being blamed for rising food
prices.
Europe is still the main centre for investment in green
power with $50bn being pumped into projects across
the continent, an increase of 2% on last year, while the
figure for America was $30bn, down 8%.
But while overall spending in the West dipped nearly 2%,
there was a 27% rise to $36.6bn in developing countries
led by China, which pumped in $15.6bn, mostly in wind
and biomass plants.
China more than doubled its installed wind turbine
capacity to 11GW of capacity, while Indian wind
investment was up 17% to $2.6bn, as its overall clean
tech spending rose to $4.1bn in 2008, 12% up on 2007
levels.
A number of Green New Deals – government reflationary
packages designed to kick-start economies and boost
action to counter climate change – have been laid out by
ministers around the world.
The slight slump in global renewable investment during
the first quarter of 2010 has alarmed the UN and New
Energy Finance, the London-based consultancy that
compiled the figures for the UN.
Following intervention form governments around the
World, according to New Energy Finance, the second
quarter of 2010 has revealed “green shoots” of recovery,
with investments at roughly the $115bn range, but still
somewhat down on 2008.
About $3bn of new money had been raised via initial
public offerings or secondary issues on the stock
markets in the second quarter, compared with none in
the first three months of this year.
The New Energy Index of clean tech stocks, which had
slumped from a 450 high to 134 by March, had since
bounced back to 230, while more project financing had
been raised in the last six weeks than in the 13 before
that. Government intervention, such as requiring state-
supported banks to raise lending to the sector, providing
capital gains tax exemptions on investments in clean
technology, creating a framework for Green Bonds and
so on, should increase this further.
Many policies to achieve growth over the medium-term
are already in place, including feed-in tariff regimes,
mandatory renewable energy targets and tax incentives.
With much emphasis amongst policy-makers on support
mechanisms, this should bring joy to investors over the
longer term.
11
 Emerging energy trends
Solar Market Trends
Most investors are at least aware of the now ubiquitous
solar market. But simply being aware of it is no longer
enough. To really make money in this industry —
predicted to grow 48% annually from 2010 to a size
of $100 billion globally by 2013 — you must first fully
understand how a solar panel comes to be and which
companies specialize in each step of the process.
The Solar Panel Process
Long before a solar panel (called a module in the
industry), can be installed on a business or household
rooftop, there are many steps that take place.
It all starts with plain old sand, from which silicon is
extracted via various chemical processes. The refined
and nearly pure silicon, called polysilicon or poly, is then
heated and cast into cubes, called ingots.
Cube-shaped ingots are then sawed into square wafers.
And then the magic happens. The polysilicon wafers
are then placed on a substrate, usually glass, to make a
solar cell. A number of cells are then arranged together
and set in place to form a panel. The final package is
called a module.
That’s how a solar panel is made in a nutshell. But
hidden in those few steps are hundreds of companies,
thousands of patents, and more than a few investment
vehicles that can make those in the know a lot of money.
Solar Growth Trends
The solar market has grown over 1,500% over the last eight
years, from less than a gigawatt of capacity to well over 15
gigawatts.
For nearly a decade, the industry has surged ahead with a
compound annual growth of over 40%, and investors have
made a lot of money on the companies making it happen.
The solar market is still however, set to triple in size over the
next five years.
By 2015, installed solar capacity will grow another 347% to
over 72 gigawatts as utilities worldwide are incentivized and
forced to adopt sustainable production assets, and as solar
energy reaches price parity in a growing number of markets.
In order for those forecasts to hold true, improved policy is
going to have to do battle with current economic conditions.
The Current State of the Solar Market
The solar market is currently facing rapidly falling prices,
both for its raw material and its finished product.
A seasonal dip in demand and the related oversupply of
panels coupled with the general economic slowdown and
restricted lending has led to an up to ~30% decrease in
selling prices for solar modules.
12
Of course, the operating costs of solar companies have
not fallen as quickly, forcing companies to reduce profit
margins as they sell discounted panels. In fact, in the recent
price scramble, Chinese manufacturers have opened an
advantage over historically dominant European companies.
Established Chinese producers are currently offering
contracted prices of about €2.00 per watt, while
European suppliers are struggling to break below €2.50
per watt. As such, Chinese solar companies are poised
to gain some European market share. You should see
that reflected in their share prices over the next few
quarters.
Even with the economy in the pits, the German solar
market--the largest in the world--is still set for steady
growth, thanks to renewed lending by German state
bank KfW and national political commitment. Funding
for rooftop and small ground installations is also flowing
again from large European investment banks and local
savings banks.
Other countries in the European Union will take longer
than Germany to heat their solar markets back up.
Any astute investor should thus ensure that they have
exposure to the German market, which will be one
of the earliest to recover from the current economic
downturn. Only the most highly efficient panels with
the best prices and best warranties will be purchased.
Smaller Chinese companies are probably the most at
risk.
Balance sheets for all solar companies will be off for
the next few quarters as reduced demand from the
recession and cyclical seasonal patterns works its way
off balance sheets.
In addition to Germany, the U.S.-considered the sleeping
giant of the solar industry-is also doing much to ensure a
robust solar rebound.
Here’s a snapshot of what the U.S. recent stimulus did
for the solar industry:
Investors are now able to take a 30% federal refund
on the value of a new installation before deducting any
state incentives. So a theoretical $100.00 dollar solar
system in North Carolina (35% state credit) now only
costs the investor $35.00-because both federal and
state incentives are now calculated from the full price.
Best part is, those federal incentives have no cap and
the project need only be finished by 2017 to qualify.
This incentive alone will rapidly increase solar demand as
homeowners and investors alike rush to get discounts on
solar installations on the taxpayers’ dime. But there are many
more solar provisions in the stimulus that will only magnify
the gains that can be taken on the right solar stocks.
There’s also $6 billion dedicated to paying the fees on
guaranteed loans. This clause is aimed at encouraging
banks to make loans for renewable projects. Most estimates
say that $6 billion in guarantees will translate into $60 in
new loans.
Of course, the operating costs of solar companies
have not fallen as quickly, forcing companies to reduce
profit margins as they sell discounted panels. In fact,
in the recent price scramble, Chinese manufacturers
have opened an advantage over historically dominant
European companies.
Established Chinese producers are currently offering
contracted prices of about 2.00 per watt, while
European suppliers are struggling to break below 2.50
per watt. As such, Chinese solar companies are poised
to gain some European market share. You should see
that reflected in their share prices over the next few
quarters.
Even with the economy in the pits, the German solar
market--the largest in the world--is still set for steady
growth, thanks to renewed lending by German state
bank KfW and national political commitment. Funding
for rooftop and small ground installations is also flowing
again from large European investment banks and local
savings banks.
Other countries in the European Union will take longer
than Germany to heat their solar markets back up.
Any astute investor should thus ensure that they have
exposure to the German market, which will be one
of the earliest to recover from the current economic
downturn. Only the most highly efficient panels with
the best prices and best warranties will be purchased.
Smaller Chinese companies are probably the most at
risk.
Balance sheets for all solar companies will be off for
the next few quarters as reduced demand from the
recession and cyclical seasonal patterns works its way
off balance sheets.
In addition to Germany, the U.S.-considered the sleeping
giant of the solar industry-is also doing much to ensure a
robust solar rebound.
Here’s a snapshot of what the U.S. recent stimulus did
for the solar industry:
Investors are now able to take a 30% federal refund
on the value of a new installation before deducting any
state incentives. So a theoretical $100.00 dollar solar
system in North Carolina (35% state credit) now only
costs the investor $35.00-because both federal and
state incentives are now calculated from the full price.
Best part is, those federal incentives have no cap and
the project need only be finished by 2017 to qualify.
This incentive alone will rapidly increase solar demand as
homeowners and investors alike rush to get discounts
on solar installations on the taxpayers’ dime. But there
are many more solar provisions in the stimulus that will
only magnify the gains that can be taken on the right
solar stocks.
There’s also $6 billion dedicated to paying the fees on
guaranteed loans. This clause is aimed at encouraging
banks to make loans for renewable projects. Most estimates
say that $6 billion in guarantees will translate into $60 in
new loans.
13
 Wind Energy Trends:
Returns that Will Blow
You Away
Because of their early aggressive approach in tackling
environmental issues, European firms have led the way
in many renewable technologies. Germany’s robust
government subsidy regime has made that country into
a cradle of the solar revolution, while the Scots take the
lead on wave power, and the Portuguese, Spanish, and
Danish are leading on wind.
But the U.S. has not been left out of those countries’
business plans. In 2007, Energias de Portugal, the
national utility, bought Horizon Wind Energy from
Goldman Sachs for $2.15 billion — the highest price
ever paid for a wind-only company. Around the same
time, Spanish company Acciona acquired rights to about
1,300 MW of wind farms in the U.S Midwest.
Each energy-hungry region is making its case to be
the most attractive wind power market, of course. In
its most recent report, the European Wind Energy
Association (EWEA) said that wind became the leader
in terms of new installed energy capacity Worldwide.
Through 2020, wind is expected to account for 34% of
new generating capacity. It will account for 46% from
2020-2030. And the goal of attaining 12-14% of Europe’s
power from wind by 2020 appears well within reach.
By 2020, it’s expected that 180 gigawatts (GW) of
electricity will be supplied by the wind — enough for
about 107 million European households. For that to
happen, wind-based capacity needs to increase 9.5
GW per year through 2020. That shouldn’t be too hard,
considering the EU installed 8.5 gigawatts worth of
wind capacity last year.
Here’s a snapshot from The Economist of the state of
the global wind power industry at the end of 2010:

COUNTRIES WITH MOST INSTALLED WIND POWER (gigawatts)

% of world 0 5 10 15 20 25 30 35
total, 2009
16,3 UNITED STATES

16,3 GERMANY

15,9 CHINA

12,1 SPAIN

6,9 INDIA

3,1 ITALY

2,8 FRANCE

2,6 BRITAIN

2,2 PORTUGAL

2,2 DENMARK

2009 2010
Source: Global Wind Energy Council

It is estimated that twenty years from now, wind
energy could produce 20% of America’s electricity. An
Energy Department study found that wind energy could
generate 20% of U.S. electricity by 2030, as compared
to today’s one percent.
The good news: The Energy Department report finds
that achieving a 20% wind contribution to U.S. electricity
supply would: reduce carbon dioxide emissions from
electricity generation by 25 percent in 2030; reduce
natural gas use by 11% and support roughly 500,000
jobs in the U.S. with more than 150,000 workers directly
employed by the wind industry.
14
The Bottom Line on Wind Energy
Between 2005 and 2007, both Germany and Spain’s
wind power capacity experienced impressive growth
(about 21% and 51%, respectively) with U.S growth
nearly 84%.
Growth is expected to continue. Since 2000, wind
power production has increased fivefold. Remember
that during that period, oil prices have grown by nearly
the same amount.
Now that peak oil is starting to get under the global
spotlight, we can expect to see a massive interest in
renewables like wind energy.
Energy Storage:
The Next
Big Trend
We have all heard the plans. The need to double, triple
the use of renewables over the next 5years. And so on.
These are lofty goals and will generate serious profits.
In fact, fortunes have already been made from the
public-facing technologies like wind and solar.
It may be hard to imagine now, but energy storage is just
as important as renewable energy. In fact, the expansion
of renewable energy would stall without this. This fact
has largely escaped the investment and political realms
as technologies like solar and wind have hogged the
spotlight. As their omission is realized, billions of dollars
will be spent to make up for lost time.
This represents a perfect opportunity for informed
Investors, to get ahead of that curve before the herd
realizes what is going on.
But for the industry to progress as quickly as planned,
there are several hurdles that need to be overcome. And
this is where the money will be made.
Wind and solar are great. But what happens when the
wind does not blow or the sun stops shining? How can
these resources provide baseload power if they are
intermittent?
The answer is Energy Storage. An industry which will be
worth billions.
The Need for Energy Storage
If solar power is not available at night, for example, it
can never become a source of baseload power like coal
or natural gas. Large scale energy storage can change
all that.
In practice, this means that when the wind is blowing
and the sun is shining, some power can be delivered to
the grid and some can be stored for later use — after
sun set or when wind speeds decline.
Until now, the problem has been that energy storage
technology has not been advancing as fast as energy
production technologies. That gap is now narrowing,
which means profits on both fronts for those in the know.
The best part is energy storage is a ´´can’t fail sector``.
It is critical for the rapid expansion of renewable energy
and government intervention Worldwide will guarantee
that this happens.
Investing in Energy Storage,
an Introduction
This sector is so vital that it will soon approach inelastic
demand. That means suppliers of energy storage
technology can raise prices without reducing demand.
This is excellent news for early stage Investors who are
lucky enough to be involved.
Governments need this sector to grow otherwise their
plans for a renewable energy future become moot.
They are propelling this industry with billions of dollars
of stimulus money and other programs through national
laboratories and partnerships.
As a side note, energy storage falls under the broad
umbrella of ´´smart grid``. Any government funding
for smart grid is also funding the expansion of energy
storage — also referred to as grid reliability. It’s a big
sector with multiple technologies.
Types of energy storage devices that exist include:
• Lead acid
• Nickel Cadmium
• Nickel Metal Hydride
• Sodium Sulfur
• Zinc Bromide
• Superconducting Magnets
• Flywheels
• Fuel Cells
• Compressed Air
• Capacitor and Ultricapacitors
• Lithium-ion
There is a market and a company for each of these.
The trick is nailing down the right time to invest in the
right sector. It is estimated that energy storage will
morph into a $600 billion industry over the next decade.
This is without mentioning the fact that it is also the
fundamental link that will propel renewable energy from
a marginal to mainstream industry.
And yet, it gets much less attention than its solar
and wind, giving savvy investors a brief window of
opportunity.
15
 Next Generation
Bio-Fuels
Hundreds of millions of years ago, the earth was covered
with shallow oceans filled with algae. As landmass
shifted and grew, water was displaced, leaving thick
masses of algal residue that were eventually buried and
compressed.
Skip forward a few eons, throw in some heat and
pressure and you have oil.
Then, in 1859, Colonel Drake drilled the first oil well in
Titusville, PA, unleashing not only oil but an economic
juggernaut that would dictate our way of life for years
to come. The world began to use oil for everything from
fuel to waterproofing, and since then has consumed
over a trillion barrels. With such furious consumption —
and no way to make more — world oil reserves are set
to dwindle.
With the depletion of oil, alternatives are destined to
emerge. And ironically algae is one of them.
Algae
Research done in various universities around the World
suggests that algae could supply enough fuel to meet
all of our transportation needs in the form of biodiesel.
With current biodiesel feedstocks, like soy and palm,
there is no way we can grow enough to supply all of our
transportation needs. Algae, on the other hand, could
supply all diesel power using a mere 0.2% of land.
For example, enough algae can be grown to replace all
transportation fuels in the U.S. on only 15,000 square
miles, or 9.6 million acres of land. This may sound like
16
a lot of but consider that there are currently 938 million
acres for farmland in the U.S.
Bio-fuels are really a form of solar energy. Crops convert
solar energy into chemical energy in a process called
photosynthesis. It is this chemical energy, in the form
of oils that is required to produce bio-fuels. According to
studies done, the more efficient a particular plant is at
converting solar energy into chemical energy, the better
it is from a bio-fuels perspective.
Algae does this so well that up to 50% of its body
weight can be fat, or the oil needed to make biodiesel.
That makes algae the highest-yielding feedstock for
biodiesel, producing 24 times more oil per acre, on
average, than the next leading feedstock — palm oil at
635 gallons/acre/year
Profits Bloom
It is possible to use human sewage, and wastewater
from agricultural endeavours, to enhance the growth
of algae. In fact, when done right, algae can double
and even triple overnight with the addition of these
´´fertilizers´´.
An additional benefit is that algae also absorb Co2 from
the air as it grows. Some utility companies have even fed
emissions from their on-site power plants directly into
algae being cultivated for bio-fuel production. Moreover,
fertilizer for other food crops can be produced by using
the leftover nutrients from algae that are not used to
make the bio-fuel.
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