Investing against climate change

[El_Machinae]

I often am thinking about how I can help speed progress on the Climate Change front. I'm somewhat politically active and vocal. I try to be efficient (though this only really contributes to Jevon's Paradox). I cannot provide much customer support for Alternative Energy, I don't have enough money. I don't buy offsets, because I earmark my 'charity dollars' to higher impact outcomes.

I don't buy shares, since I don't think shares provide much support in real terms. If I'm going to invest in the stock market, I tend to try to maximize my returns.

The other day I was thinking about these trends.

Driving down the price of energy is a good thing, since cheap energy allows greater quality of life. As well, it reduces the profit on production of fossil fuels, which forces us to leave it in the ground. In the end, the climate can actually handle the $40/barrel oil and natural gas. It's the stuff that's viable at $100/barrel we don't want mobilized.

I don't know why this didn't occur to me earlier, but I can help these trends by buying debt from Alt.E companies. Many initial expansion efforts (I think?) are started from debt issuance. The problem with buying debt is that you share the downside, but don't share the upside (which is contrary to my investing instincts). But if I earmark these dollars as 'doing my part', I'd probably find it psychologically easier. I'm thinking Alt.E mutual funds. Normally I don't like mutual funds, but this way I get better diversification. As well, I am encouraging financiers to attend the market, which means more people are looking for opportunities.

Thoughts?

 

[Borachio]

I'm doing my bit by spending hardly any money at all. And what I do spend mostly goes on books, which at the moment represent a carbon sink. Though I expect Kindle will put paid to that very soon.

 

[classical_hero]

But wind isn't as reliable an neither are really reliable for baseload capacity, which is the basis of power generation.
http://notrickszone.com/2015/02/07/germany-2014-report-card-is-in-its-25000-wind-turbines-get-an-f-averaged-only-14-8-of-rated-capacity/#sthash.AQdV3SsA.DVH5nCZa.dpbs

That 14.8% is the average amount of the name plate capacity that wind power actually produces. The maximum is decent, but considering how far of it is from the average means that such times are rare and not long at all, but the minimum of 0.06% is disastrous and much closer to the average than the maximum, which means more production time is closer to the minimum than the maximum, which doesn't bode well for wind power. Especially considering that the second box shows that for much of the time close to 85% of the time is 30% or less of name plate capacity, which is shocking.

http://www.theguardian.com/environment/2015/jun/05/norways-pension-fund-to-divest-8bn-from-coal-a-new-analysis-shows
I am wondering where Norway got the money in the first place? That's right it got it from oil, a fossil feul. To be better they should really give the money away to those affected if they are true to the cause, which I truly doubt it, because they are only going away from coal miners and power producers, which is rather convenient, since Norway has none so it won't hurt any national companies.

 

[uppi]

Especially considering that the second box shows that for much of the time close to 85% of the time is 30% or less of name plate capacity, which is shocking.

At a production cost of currently less than 50 cents per Watt (the numbers in the OP are quite old already), these numbers are much less shocking: At a selling price of 10 cent/kWh that just means it takes 50 hours instead of 5 until you have recouped your investment, if the plate runs at 10% efficiency.

That means, electricity is going to be essentially free if the sun is shining. Any storage scheme can be quite wasteful and still be profitable. If you store electricity at 10% efficiency the above example would require 500 hours of operation for that. An investment that seems prudent.

At the current price, we have solved the energy generation problem. What remains are energy storage and distribution problems. So investing in solar cell companies is not going to change much, investing in battery companies and infrastructure projects seems to be the better choice.

What is going to be difficult is that these sources require different infrastructures and economic models than what we have today and the transition is going to cost. I was told, that Africa is becoming an important market for solar cells, because they do not have so much baggage of existing infrastructure and can immediately reap the benefits.

 

[El_Machinae]

I think batteries are going to go as fast as possible already. There are tremendous market forces there already.

 

[onejayhawk]

Energy storage has been the bottle neck for a great many things.

We are getting the price for a kwhr to the point where it makes financial sense. Utilities will start getting serious about ending the subsidies they have been giving. My grid owner charges $0.057 kwhr. That has always been provided free of charge to suppliers, partly because it made the government happy and partly because it was too much trouble to administer. I expect that to change.

J

 

[uppi]

I think batteries are going to go as fast as possible already. There are tremendous market forces there already.

In the high energy density market for mobile applications there are. Bu that is the wrong market if we talk about the grid and solar power. There you want high capacity and extremely cheap costs. Energy density is not going to matter that much for stationary applications, so we will not use the same batteries we want for our phones and cars.

 

[Narz]

I hug trees which increases their growth by 10% (as opposed to hugging women which increases my growth by 10% ).

 

[El_Machinae]

In the high energy density market for mobile applications there are. Bu that is the wrong market if we talk about the grid and solar power. There you want high capacity and extremely cheap costs. Energy density is not going to matter that much for stationary applications, so we will not use the same batteries we want for our phones and cars.

That's an incredibly good point. The longrun solution is capacity and cheap costs. As long as the infrastructure doesn't take up much more than my heating-oil tank, it would be great.

 

[classical_hero]

But yet again you guys are forgetting the environmental cost of extracting rare earth minerals to produce the renewable energy of wind and solar.
http://www.theguardian.com/sustainable-business/rare-earth-mining-china-social-environmental-costs

Rare earths are a group of 17 elements: "iron grey to silvery lustrous metals" that are "typically soft, malleable, and ductile; and usually reactive", according to the US Geological Survey. They're crucial in manufacturing a broad array of high-tech products, such as smartphones, wind turbines, camera lenses, magnets and missile defence systems. China produces more than 85% of the world's supply, about half of which comes from Baotou, a city of 2.5 million in China's Inner Mongolia Autonomous Region, 650km northwest of Beijing.

Processing rare earths is a dirty business. Their ore is often laced with radioactive materials such as thorium, and separating the wheat from the chaff requires huge amounts of carcinogenic toxins – sulphates, ammonia and hydrochloric acid. Processing one ton of rare earths produces 2,000 tons of toxic waste; Baotou's rare earths enterprises produce 10m tons of wastewater per year. They're pumped into tailings dams, like the one by Wang's village, 12km west of the city centre.

http://mediatrackers.org/montana/2014/01/14/green-wind-solar-power

In August of 2012, a British newspaper published an investigative report about the environmental problems that were occurring in the area of the town of Baotou — considered the epicenter of the Chinese rare-earth metals industry — due to the mining and processing practices allowed by the Chinese Government.

“From the air it looks like a huge lake, fed by many tributaries, but on the ground it turns out to be a murky expanse of water, in which no fish or algae can survive,” states the paper. “The shore is coated with a black crust, so thick you can walk on it. Into this huge, 10 sq km tailings pond nearby factories discharge water loaded with chemicals used to process the 17 most sought after minerals in the world, collectively known as rare earths.”

The expansion of renewable power sources would inevitably require more heavy metal mining.

“To provide most of our power through renewables would take hundreds of times the amount of rare-earth metals we are mining today,” states Professor Thomas Graedel of the Yale University School of Forestry and Environmental Studies.

Popular silicon solar panels offer their own unique environmental catch-22. In order to make the silicon, the element silica must be heated in furnaces to 3,000 degrees farenheit. Most often, the power for those furnaces is produced by coal-fired electricity.”

Solar and wind energy may not be “spillable,” but they’re clearly capable of inflicting severe environmental damage.

It does seem that many of the so called "Green" schemes are doing more damage to the environment than they are supposed to be helping, since to produce the same amount of energy as conventional fossil fuel plant you need massive spaces to do the same job. But if you guys are correct then why are there massive subsidies to supply green energy? Considering biomass is the largest supply of "green energy" in Europe, this is important.
http://www.economist.com/news/leaders/21575759-europes-wood-subsidies-show-folly-focusing-green-policy-renewables-bonfire

The dash for biomass, though, has many problems (see article). As with wind and solar power, investment in biomass does not happen without subsidy; current plans to convert half of Drax’s 4,000 megawatt capacity from coal to biomass depend on getting an extra £45 per megawatt hour from the government on top of what the electricity sells for. It also takes a lot of land to produce power with biomass. Generating 2,000MW of electricity from wood in a sustainable way requires a forest of some 6,600 square kilometres—which is more or less, as it happens, the area of the whole West Riding.

So you need massive subsidies which would add abut half more to the price of energy based on the cheapest price I could find. Which was close to £94 per MWh
https://www.ukpower.co.uk/home_energy/tariffs-per-unit-kwh
http://cnsnews.com/news/article/barbara-hollingsworth/despite-39b-annual-govt-subsidies-solar-produced-05-electricity

Even with massive government subsidies, some solar projects have not lived up to expectations.

For example, a project to install solar panels on schools and other public buildings in three counties in New Jersey that was supposed to pay for itself by allowing the counties to sell excess electricity back to the grid was touted as a national model four years ago. But the deal has gone sour, with only half of the work completed and taxpayers on the hook for $88 million.

"Solar energy remains prohibitively expensive - often three times more than electricity produced from natural gas and other sources," according to a report by the Taxpayers Protection Alliance (TPA) entitled Filling the Solar Sinkhole: Billions of Bucks Have Delivered Too Little Bang.

That includes the Ivanpah Solar Electric Generating System in California, the largest solar power plant of its type in the world, which generated only about half of the electricity it was expecting to produce last year due to “fewer sunny days” than initially predicted.

“Despite reaping $1.6 billion in subsidies, [Ivanpah] produces electricity at a cost 3 times higher than traditional power and has requested $539 million in additional direct handouts from the federal government,” the report said.

“We’re shining a bright spotlight on the darker side of solar power,” said TPA president David Williams. “Taxpayer-backed loans to the solar industry, bailouts, and publicly funded grants cost Americans more than $39 billion annually. Despite these massive costs, taxpayers aren’t even benefitting with lower electricity prices.”

In addition to the federal tax credits, grants, guaranteed loans and other subsidies, "there are 43 different solar-power-related tax breaks available across 20 states" as well as "538 different state and local green energy rebate programs across the United States," TPA researchers found.

"These schemes are intended to reduce the final cost of products including solar water heaters and grid-connected rooftop solar panels to make them more appealing to customers." However, even with generous government subsidies, including a tax credit that reduces the cost of installing solar panels by 30 percent, "none of it has worked," the TPA report concluded.

"With so little to show for so many costly initiatives, it should be apparent to objective observers that federal solar power efforts have not been a productive or prudent use of precious tax dollars."

 

[Arwon]

People who in 2015 throw about terms like "capacity factor" and "baseload" as though they're arguments against renewable electricity generation are pretty much Dunning-Kruger performance art.

 

[Arwon]

I don't really understand why the crank far right have turned certain methods of producing alternating current into a culture war feelings campaign. It's very strange.

Incidentally on rare earth metals, it's not that they're literally only in China, it's that the Chinese suppliers are able to maintain an output price that nobody else can match while meeting most current needs. It sucks that the Chinese businesses are doing so in such a damaging way but hey, that's capitalism for you. If that's your concern, welcome to the eco-socialist revolution I guess.

The surface area thing is stupid, wind turbines and solar panels are not exclusive activities on a particular piece of surface area.

 

[bhavv]

I hug trees which increases their growth by 10% (as opposed to hugging women which increases my growth by 10% ).

I'm unsure of what you mean by increasing your own growth, maybe you could send me pictures to clarify.

 

[Borachio]

Well, plainly hugging women is fattening, and you get fat deposited mainly in the waist area (which is exactly where you don't want it, btw). What's not to understand?

 

[Mise]

I don't buy shares, since I don't think shares provide much support in real terms. If I'm going to invest in the stock market, I tend to try to maximize my returns.

...

I don't know why this didn't occur to me earlier, but I can help these trends by buying debt from Alt.E companies. Many initial expansion efforts (I think?) are started from debt issuance. The problem with buying debt is that you share the downside, but don't share the upside (which is contrary to my investing instincts). But if I earmark these dollars as 'doing my part', I'd probably find it psychologically easier. I'm thinking Alt.E mutual funds. Normally I don't like mutual funds, but this way I get better diversification. As well, I am encouraging financiers to attend the market, which means more people are looking for opportunities.

Thoughts?

Thoughts indeed! I don't know about Canada, but there are a lot of ways you can directly "help" (facilitate?) Alt E through investments in the UK. The company I currently buy electricity for recently issued bonds at 7%. This was for investment into renewable energy. This isn't the exact same as what you're talking about, of course, but I'm sure there are lots of companies who are issuing bonds, who have a strong existing business model, solid cash flows, and a good chance of paying back.

I actually think that bond issues are a better investment if you're looking at risk-adjusted return as well, because they offer better rates, and the risk is only that the business will go bust. But if the business is already well established in selling energy to consumers, then this is a lower risk than the risk of losing money on the stock price of the same company. Put another way, for you to gain on the stock price, the company needs to grow revenues. But to make money from bonds, the company simply needs to continue existing. And a 7% return (if it's typical - I don't know) is a good return.

Another thing you might be interested in is crowd funding. No, I don't mean kickstarter -- I mean places like https://www.crowdcube.com/ , where you take an actual stake in the company. You buy legitimate, legally recognised shares in the company, at the initial point of offering. (The same platform also offers bonds, too.) We've discussed in the past your arguments that "investing" doesn't perform a significant social value beyond the IPO; if that's the concern, then platforms like crowdcube allow you to invest directly at IPO-equivalent level. I don't know if there's something like this in Canada, but it's worth looking into.

Do keep us informed what you end up doing - I'm really interested in this myself!

 

[Zelig]

The surface area thing is stupid, wind turbines and solar panels are not exclusive activities on a particular piece of surface area.

Sure they are, didn't you hear about Intel abandoning its global headquarters because of an invasion of wind turbines?

 

[El_Machinae]

Thanks a ton, Mise. I appreciate the moral support. It will be a little while before I save up my next $10k to invest, though I'm eyeing my under-performing Integrated Oil portion of my portfolio and thinking about cannibalising it.

I like the idea of buying direct debt. I was originally thinking of buying a mutual fund, but that would be secondary-market debt paper, and then I'd also worry about the value of the principle (whereas if I buy original debt, I only really care about the return since I'm a buy-and-hold kinda guy).

The idea of going straight into IPO is tempting, but I don't have enough confidence in picking winners. The field could explode into viability, but I don't know if any specific company will.

Another friend pointed me at this. It's outside the intent of this thread, since I don't want to do charity on this front. That said, a pilot project in India might be anti-poverty spending, and so I could justify my charity dollars there.
https://www.indiegogo.com/projects/vortex-bladeless-a-wind-generator-without-blades--3#/story