Vestas Whiffs On Earnings As Wind Energy Sputters

August 20, 2010

The wind business continues to suffer from a lack of credit and government policy.

This was evident in a disappointing earnings report from wind turbine market leader Vestas Wind Systems. The Danish company on Wednesday responded to the downturn by cutting its annual sales forecast to 6 billion Euros from 7 billion and said it expects an EBIT margin (before interest and taxes) of about half of its previous estimate.

Its explanation was that turbine shipments to projects in Germany, Spain and the United States were delayed.

Here are several details from the financial report:

*Second-quarter shipments of 283 turbines were down 54 percent;
*Second-quarter revenue was off 17 percent;
*The company swung to an after-tax loss of 119 million Euros from a profit of 43 million Euros a year ago;
*The company laid off 300 people in Denmark. It still expects to add 3,000 employees in 2010, down from previous target of 3,400.

“The decline in revenue and earnings reflects the very low level of activity in the wake of the credit crisis and Vestas’ decision not to adjust its capacity further because of short-term market developments,” the company said in a press release.

Vestas tempered the news by pointing out that second-quarter orders rose to 3,031 megawatts of turbines, a record. Banks are more critical of projects than they were before the credit crisis began, but now more are venturing into the market, the company said.

And yet, there is no doubt this burgeoning industry is being held back by a lack of finance. The European Wind Energy Association acknowledged the same in early July as it reported that 118 offshore wind turbines were installed in Europe during the first half of 2010. “Developers are severely constrained.”

A more dire report came from the American Wind Energy Association late last month. The trade association said wind power installations so far this year were off 71 percent from 2009. Only 700 megawatts of equipment was added in the second quarter – below levels from 2007.

The trade association blamed the lack of national renewable portfolio standards mandating the use of renewable energy.

While the second half of the year could be better, installations for the full year will likely be 25 percent to 45 percent below last year, it said.

It could be some time before this boom and bust industry regains its once lofty status.

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Posted by Mark Boslet

DOE Home Weatherization Looks More Like PACE – $120 Million To Speed Up Efforts

August 19, 2010

PACE is dead. But the Department of Energy is turning up the heat under its home weatherization – or more accurately retrofit – efforts.

The department said Thursday that 31,600 homes across the country were weatherized in June, a record. The target for the summer: 80,000. It also said that for the first time, weatherization will include renewable energy – such as solar – along with energy-efficient appliances, cool roofs and tankless water heaters.

To fuel the effort, Energy Secretary Steven Chu on Thursday awarded $120 million of Recovery Act funds to more than 100 organizations to expand programs and undertake pilot projects.

With PACE, or Property Assessed Clean Energy, on the sidelines, alternate efforts to improve the energy efficiency of homes and buildings have been necessary. PACE came to a near halt this spring and summer when Fannie Mae, Freddie Mac and Fannie regulator, the Federal Housing Finance Agency, barred lenders from writing mortgages for PACE homes. (PACE programs, which were taking root in 23 states, typically lend government money to homeowners and place special assessments for repayment on property tax bills.) Fannie and company worried PACE liens would receive priority over mortgage leans in the even of defaults.

To mimic the work of many PACE programs, Chu said the government would now permit weatherization programs to install renewable energy – solar panels, solar heating systems and wind turbines – as well as cool roofs, insulation, high-efficiency appliances, tankless water heaters, combination boilers for heat and hot water, in-home energy monitors and ductless heat pumps. In other words, weatherization begins to look more like energy retrofit.

Retrofit projects in 27 states will get $90 million of the money. The work will be performed by 103 local companies. An additional $30 million will support 16 pilot projects targeting low-income households and testing new ways to finance retrofits and new technologies.

For instance, one program in Washington, D.C., received $2.6 million to improve energy efficiency at 2,500 eligible housing units. A $1.25 million loan loss reserve will be set up so nearly $8 million in private loans can be made to homeowners.

Another $850,000 will go to a program in Utah to create a revolving loan program offering low-interest financing to low-income households.

The Energy Department said its weatherization program created 13,000 jobs for carpenters, electricians and other workers during the second quarter.

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Posted by Mark Boslet

Huge Expansion Of Solar Production Capacity Continues

August 18, 2010

The manufacturing capacity of crystalline silicon solar panels is set to grow by about 80 percent this year as producers, especially in China, hastily build out factories.

The added capacity should amount to between 11 gigawatts and 13 gigawatts – or roughly the equivalent of this year’s entire market demand, equipment supplier Applied Materials said Wednesday. The company expects sales this year to be above 12 gigawatts.

Crystalline silicon solar cell manufacturing equipment

It’s “a heck of a lot of capacity,” CEO Michael Splinter said on a conference call. “There is a huge expansion in China.”

The onrush of new capacity is likely to lead to further price declines in coming quarters. It also could pressure profit margins at producers.

Applied offered its observation on a third-quarter conference call, where it said it saw solar demand increasing next year in addition to supply. Growth in Germany, the world’s largest market, could moderate from this year. But sales elsewhere in Europe, in China and in parts of the United States should increase.

The company has a particular good vantage point from which to observe production increases since it sells manufacturing equipment to the industry. On the conference call, it said:

*Spending on equipment to make crystalline silicon panels should double in 2010 to $8 billion.

*The utilization of fabs, or factories, has improved.

*The factories of the 10 to 15 largest producers are “fully loaded” and can’t keep up with demand.

*Producers have not yet begun to slow capacity growth. “We haven’t seen signs of a pull back at this point,” says Splinter. “We just see very strong orders.”

Applied said third-quarter sales in its energy and environmental solutions business more than doubled from the second quarter to $387 million, led by its crystalline silicon business. Orders, however, fell to $353 million. In late July, the company killed its SunFab product line for thin-film solar cells manufacturing.

As a result of the SunFab decision, Applied took a quarterly charge of $405 million, which forced the business unit to post an operating loss of $371 million.

Applied said that despite its SunFab decision a Chinese customer is considering a factory and could make a decision whether to go ahead in the fourth quarter.

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Suntech Boasts It Is The Largest Solar Company, Warns Of Higher Wafer Costs

August 18, 2010

Suntech Power Holdings said a surge in second-quarter sales made it the world’s largest solar module producer by revenue.

But it warned of higher silicon wafer costs and said its next generation high-efficiency Pluto cells still struggle with manufacturing difficulties.

The Chinese producer reported quarterly sales Wednesday that rose 95 percent from last year to $625 million. Rival First Solar’s sales for its recent second-quarter were $588 million.

However, the company said silicon wafer prices were largely unchanged in the second quarter, but are showing signs of rising. Suntech could find itself exposed to short-term increases, said CEO Zhengrong Shi. The company indicated it would expand its wafer production capacity. (Suntech has a minority stake in wafer maker Shunda Holdings. Shunda is going through reorganization.)

The news led to warning flags from some analysts. “We believe (Suntech’s) costs will remain above its competitors due to near-term tightness in wafer supply,” cautioned Needham’s Y. Edwin Mok.

Suntech also acknowledged that Pluto production still faces hurdles. The company made progress eliminating some production bottlenecks, Shi said on a conference call. He noted that production increase to 6 megawatts during the quarter from 4 megawatts, and that more manufacturing capacity would shift to Pluto in coming months.

The cells are achieving 19 percent efficient on mono-crystalline wafers and are key to Suntech ability to compete with efficiency leader SunPower.

On the conference all, Suntech also said:

*Its decision earlier this month to kill trial production of amorphous thin-film solar cells was tied to the decline in crystalline silicon module prices over the past couple years and delays in final acceptance testing of the line. The company took a $54.6 million impairment charge for its thin-film production equipment.

*It would accelerate plans to add crystalline silicon module production capacity. The new target is 1.8 gigawatts by the end of the year, up from 1.4 gigawatts at the end of the second quarter. The company also increased its shipment target for 2010, to 1.5 gigawatts from 1.3 gigawatts.

*Non-silicon production costs fell to 52 cents a watt from 56 cents. The company said it is on target to reach 50 cents.

*Average module sales prices were down 4 percent in the second quarter, mostly due to the decline in the value of the Euro. Prices could decline slightly in the third quarter, but should be relatively stable in the second half of the year, the company said.

*The solar market remains solid. German business was strong in the second quarter and should remain so during the second half of the year, despite the July cuts in the nation’s feed-in tariff. Sales in France, Italy and the Benelux countries also should grow in the second half of the year.

*Meanwhile, North American demand showed signs of improvement. Sales in the United States grew 35 percent sequentially in the quarter. Suntech also said it sees potential in Asia, particularly in India. The sun’s intensity is good there and the nation’s power grid is unreliable, says Shi. “The Indian market is a sleeping giant in terms of the potential for long-term solar demand.”

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Fuel Cell Maker FuelCell Energy Looks To Farms For A Market

August 17, 2010

The United States has more than 2 million farms. What if each one installed a methane-to-energy fuel cell power plant?

The market opportunity may be overstated somewhat. Farms come in all sizes and not all have enough organic waste from animals or plants to run a 500-kilowatt or 1-megawatt fuel cell. Plus, the equipment can be expensive, especially if a digester is needed to decompose manure or plant residue.

But, if neighborhood farms come together to pool their investments and contribute their wastes, an active sales pipeline may develop.

The potential seems real. For example, FuelCell Energy of Danbury, CT, announced

Tuesday that it sold a 1.4-megawatt fuel cell that will be used at the Olivera Egg Ranch in California. The fuel cell will run on methane gas generated by decomposing chicken waste and power for three Olivera facilities. While the cell is large for such an operation, so is the company. Olivera sells 14 million cartons of eggs a year.

Not all farms need as much electricity. Smaller FuelCell Energy cells are running at Gills Onions, the nation’s largest onion processor, also in California. Two 300-kilowatt cells are fed by up to 300,000 pounds of daily onion peels – which are ground up and fed into a digester where they produce methane.

The FuelCell Energy says waste-to-energy facilities are part of its target market. Included are wastewater treatment plants, which also produce methane from the dirty water.

Bloom Energy, which presently is focused on corporate customers, also points to the agrarian market as a future opportunity. During a July appearance at the Aspen Ideas Festival, co-founder and CEO KR Sridhar said he envisions a time in the near future when a village, such as one in Africa, could run a cell with biomass to generate electricity then distributed the energy to neighbors on a closed micro grid.

One challenge in the next few years will be cost. A 500-kilowatt fuel cell can sell for $1.7 million and require another $150,000 for installation. A digester also is expensive. Many farms will find this equipment out of reach.

Presently, typical agricultural waste-to-energy systems rely on burning methane and turning turbines rather than running fuel cells.  Cargill, for instance, operates an anaerobic digester at an Idaho farm, converting manure from 6,000 cows into 1 million kilowatt-hours of electricity a month. The electricity is sold to the local power grid. Others systems operate in Washington State and elsewhere.

The difference is a fuel cell doesn’t rely on combustion. No emissions result.

Because of cost, perhaps the real opportunity will come from neighborhood or regional pooling. This will require carting waste and plant clippings, and it will change the cost equation somewhat. It will be interested to see if creative services and solutions evolve to allow this to happen.

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Smooth Stone Vows To Nearly Eliminate Server Power Use In Data Centers

August 16, 2010

Secretive chipmaker Smooth Stone came out of stealth today with an announcement of $48 million in funding and a vow to virtually eliminate server power use in data centers.

The sheer size of the Austin company’s first venture round provides a useful validation of its business plan. The funding drew investors Battery Ventures, Highland Capital Partners, Flybridge Capital Partners, Texas Instruments, the Advanced Technology Investment Company and ARM, which had already provided money to the company and has a seat on its board. (Smooth Stone had previously raised $3 million of seed capital.)

The company is among a new wave of start-ups aiming to cut data center power use – specifically server energy consumption.

CEO Barry Evans declined to provide details about its development and delivery of an ARM-based chip. But he said the goal is to deliver a “disruptive” technology that will eliminate “almost all” of the power demands of a data-center server. ARM chips are generally used in low-power devices, such as cell phones and handhelds.

“We want to take power out of the equation” for data center managers, he said in an interview. “The problem is becoming so acute” – along with data-center rack space.

Other companies addressing the market include SeaMicro, which promises one-quarter the power and one-quarter the space of a typical Intel-based Xeon server. The company’s SM1000 server uses 512 Atom chips, another Intel chip made for netbooks and other low-power devices.

A third company apparently making high-efficiency processors for servers is Angilux, which Google bought earlier this month.

Smooth Stone’s business model appears to be focused on chip making, leaving the development of servers to partners and customers. The company isn’t offering much detail on its plans other than to say closing the $48 million round required it to have all the important pieces lined up, from technology to market validation.

Smooth Stone has been engaged with the market for some time, says Evans.

He adds that the money will allow it to complete its chip development and double the size of its development team over two to three months. That could hasten its move into the market.

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Will Gevo Want $1 Billion To Execute Its Biofuels Strategy?

August 16, 2010

Gevo announced plans to sell $150 million of its stock to the public. Apparently it really needs the money!

The track record for biofuels IPOs has not been good over the years. There is little to suggest it is much changed now. So one would imagine that any money-losing biofuels company – like Gevo – will eventually end up dealing with a restless group of profit-minded shareholders.

So why test the financial markets and risk years of lackluster investor response – similar to what biofuels company Codexis and battery maker A123 have experienced during their public lives so far?

Gevo’s S-1 filing with the Securities and Exchange Commission on Thursday answers that question. It’s called money – perhaps $1 billion of it.

Gevo explains that its ambition is to use the cash it raises from its IPO to buy existing ethanol plants (directly and through joint ventures) and convert them to isobutanol production using the company’s proprietary technology. Gevo’s technology breaks down a variety of feedstocks, such as corn, wheat, sugar cane and cellulosic materials, into sugars using a yeast biocatalyst. A second piece of the process is an isobutanol separations unit that bolts onto an ethanol plant.

Isobutanol is a specialty chemical that substitutes for ethanol and blends with gasoline. It also is used in the production of plastics, rubber, lubricants and polyester.

The company presently has an agreement to acquire one facility, a 22 million gallon plant in Minnesota, which it is to buy for $20.7 million from Agri-Energy. The deal was announced earlier this week.

The company’s long-term goal is to produce more than 500 million gallons of isobutanol by 2014. To that end, Gevo states in its S-1 that, “We may require substantial additional financing to achieve our goals” and “we may seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships and licensing arrangements. To the extent that we raise additional capital through the sale or issuance of equity, warrants or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder.”

In other words, prepare for a massive company scale up. Consider this back of the envelope calculation. To reach an annual production target of 500 million gallons, Gevo will need 28 plants similar to the 22 million gallon facility it is buying in Minnesota. That’s because after converting the plant to isobutanol, production will fall to 18 million gallons a year. If one such plant costs $20.7 million, 27 additional plants will cost about $559 million. Add to that conversion costs of about $17 million a plant, or another $459 million. Together the sum is more than $1 billion.

This price tag may be reduced if the company relies on joint ventures. But then so too is its profit potential.

Gevo is not the first biofuels producer to recently target the public financial markets. Amyris filed in April with hopes of raising $100 million, even if it seems in no rush. The company in June raised more than $130 million in additional private capital and struck an equity deal with an affiliate of the French oil and gas giant Total.

PetroAlgae also announced a $200 million IPO this week.

It will be an interesting test in coming months to see how investors feel about funding an industry that is still learning to plant both feet on the ground – and which will need a bunch of money to do so.

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Will The U.S. Generate Too Much Energy? Vinod Khosla Thinks So

August 12, 2010

The potential for clean-tech innovation is so great you might be wise to expect the unexpected. What about an energy glut?

This was the prediction of rock star venture capitalist Vinod Khosla during a panel discussion Tuesday. The event at Google’s Silicon Valley campus was held to discuss the implications of California’s Proposition 23, an attempt to rollback the state’s ambitious climate legislation.

But Khosla stole the show with his outlook for the clean-tech innovation and energy use. “In 10 to 15 years, we will be shutting down (power) plants” because of an excess of electricity in this country, Khosla said. There is an “infinite” opportunity for technological innovation.

Such an upbeat outlook is no surprise from a man whose venture firm, Khosla Ventures, is an active clean-tech investor. Khosla said his firm is backing companies that hope to cut energy use in lighting and data center server racks by 80 percent.

He is equally upbeat about prospects for the United States over China – not always the prevailing wisdom these days. “I won’t say China is winning the clean-tech race,” he says. “But they are clearly paying a lot more attention to the race.”

Here are several other observations from the panel:

*Asked if there was an advantage to creating companies in Silicon Valley rather than China, Khosla was emphatic. “No question about it.” The people are here. The markets are here.

*Nuclear power no longer has an advantage over renewables, he added. There hasn’t been a nuclear plant build in recent years that can beat $7,000 a kilowatt. That makes wind and solar (in some parts of the world) competitive, he says.

*Proposition 23 is a threat because it will kill the clean-energy markets California’s A.B. 32 created. Both Khosla and Google Green Energy Czar William Wiehl concur on this point. Proposition 23, which will go to the ballot in November, would suspend A.B. 32 until the state’s unemployment rate drops to 5.5 percent or less for four consecutive quarters. Texas oil companies Valero and Tesoro back the measure. A.B. 32 sets reporting guidelines for polluters, establishes a statewide limit for carbon and guides emissions back to 1990 levels by 2020.

*A.B. 32 has helped create 500,000 clean-tech jobs in California, Wiehl says.

*Google, adds Wiehl, has made strides with energy efficiency. The company builds its own data centers and servers. As a result, data center energy use is one half of what it would be if the company followed industry-standard best practices, he said.

*As to the next “Google.” “There is no doubt in my mind we will see 10 of these” in clean tech, says Khosla. “Today California has the pole position to win that race.”

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A123 Looks To Add More Production Capacity

August 11, 2010

A123 Systems disappointed Wall Street with weak second-quarter results on Tuesday, but said it remains confident a huge market for its batteries is just around the corner.

The lithium-ion battery maker said that once again it is considering expanding production capacity. And it calculated its market opportunity from current customers at $1.5 billion by 2013 – a huge target.

The lithium-ion battery market holds great promise. With electric cars and trucks starting to go on sale in significant numbers this year and next, there is great potential for growth. Late last year, Pike Research said lithium-ion battery sales to the transportation market could reach $8 billion by 2015.

But the expense of building factories is high, and concerns have begun to emerge about industry-wide over capacity.

A123 doesn’t seem alarmed. The company said on a conference call that projected demand from its current customers could present it with a $1.5 billion opportunity by 2013.

To prepare, CEO David Vieau said the company is considering expanding production capacity another 30 percent by the end of 2011. The company also announced capacity expansions when it released first- and fourth-quarter results.

The present plan is to reach 760 megawatts of production capacity by the end of 2011. A123 is now considering raising the target to 1,000 megawatts. Vieau told analyst he would take three to four months to make a decision.

He also announced a deal with AES Energy Storage to deploy 44 megawatts of lithium-ion battery storage on the electric grid. By mid 2011, as much as 70 megawatts could be deployed worldwide by the AES, making it the largest lithium-ion battery storage deployment, he said.

A123 said second-quarter revenue came to $22.6 million and its loss widened to 33 cents a share. Wall Street analysts had been looking for sales of $25.5 million and a loss of 27 cents a share.

A123 stock fell to $9.95 in after-market trading. The shares are down about 26 percent from their IPO price last September.

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Nanosys Unveils $30M In Funding, Strikes Solar Deal With Samsung

August 10, 2010

Nanosys strengthened its competitive standing in the clean-tech market by securing as much as $30 million in new funding and striking a deal to have Samsung use its solar technology.

The Palo Alto start-up that became a poster child of the nanotech craze six years ago, has been steadily remaking itself into a supplier of technology to electronics and green-tech companies. The heady days are gone, as are the plans for a 2004 IPO.

But the company has built a respectable portfolio of technologies that boost the capacity of lithium ion batteries and improve the quality and efficiency of LED displays and solid-state lighting.

Now it has received validation of its solar technology in the form of a licensing agreement with Samsung. As part of the deal, Samsung Venture Investment Corp. will take a $15 million equity stake in Nanosys – on top of the millions more the company will pay for the license.

Previous Nanosys investors Arch Venture Partners, El Dorado Ventures, Polaris Venture Capital and Venrock will join the funding round, contributing $10 million. Nanosys expects to add another $5 million to the round by October.

CEO Jason Hartlove says the Samsung money will allow Nanosys to build a Silicon Valley plant and ramp production volumes.

But more importantly, Samsung will license Nanosys’ nano-particle coating technology and nano-inks to improve the efficiency and lower the cost of its thin-film solar cell production.

Samsung, a relatively latecomer to solar, announced earlier this week that it would more than quadruple solar cell production by the first half of next year. The company kicked off a 30 MW solar pilot last September and now has set its sights on 130 MW. It is reportedly working with both crystalline cells and thin film technologies.

Hartlove says his nano-particle coatings shift the infrared and ultraviolet wavelength light that thin film can’t process to colors the cells can absorb. Efficiency goes up. Meanwhile, nano-inks are quicker and cheaper alternatives to the chemical vapor deposition reactors that thin-film producers often use.

Samsung also will work with Nanosys on Nanosys’ quantum dot technology for LED chips.

“This is a very important deal for us,” says Hartlove.

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