Wind Farms Set Wall Street Aflutter

By RUSSELL GOLD
Associated Press
A new program offering cash rebates on renewable energy investments is sparking interest in wind farms. A worker atop a windmill in Maine.
After nearly a six-month lull, Wall Street is getting back into the business of financing new wind farms.
Morgan Stanley and Citigroup Inc. have invested $100 million each to finance separate wind farms this month, taking advantage of a brand-new federal program that is paying substantial cash grants to help cover the cost of renewable energy investments.
Bankers say this is the beginning of an active pipeline of new wind-farm financing, as well as investment in large solar installations and geothermal facilities. Project developers and Wall Street appear to be viewing the federal cash grant program as such a good deal, industry experts say, it may grow much larger than its Washington creators expected.
"The money is coming back," says Ethan Zindler, head of North American research at consultant New Energy Finance Ltd.
Under the program, the government will give a cash rebate for 30% of the cost of building a renewable-energy facility, awarded 60 days after an application is approved. Investors are also given valuable accelerated depreciation deductions, which help offset taxes.
The Energy and Treasury departments have said they expect to spend $3 billion on the program, which started July 31 and runs through the end of 2010, and was part of the stimulus bill. But a government spokesman says requests for $800 million in grants were submitted during the first four weeks.
Some Wall Street bankers say they expect applications to grow to $10 billion, based on projected wind-power installations.
"We see opportunities and we are pursuing them pretty actively," says Kevin Walsh, managing director of General Electric Co.'s GE Energy Financial Services division, which was a major financier of wind deals in the past.
The strong interest echoes the $3 billion cash-for-clunkers program that provided incentives to trade in older, lower-gas mileage cars, and which was quickly overwhelmed by demand. "We are concerned that this may evolve into a cash-for-clunkers version 2.0," says a spokesman for Rep. Darrell Issa, a California Republican.

But unlike the popular cash-for-clunkers programs, there is no spending cap on the renewable energy grants, and the government has committed to spending as much as is needed to keep renewable-energy investments flowing.
Under an earlier renewable energy program, the government gave companies tax credits over 10 years, which were attractive as long as financial firms believed they would be generating taxable profits for years to come. When Wall Street imploded last year, profits turned to losses and appetite for these investments disappeared quickly. Some of the companies most active in these deals -- including Lehman Brothers Holdings Inc. and American International Group Inc. -- were hobbled or destroyed by the turmoil.
But the new cash grants are offering the potential for attractive returns. Several bankers interviewed said they expected deals to provide an annual return of anywhere from 9% to 15%.
Most of the investments are expected to go to wind projects, because the industry is more mature and in a better position to capture limited funds. "I would not be surprised if the program is ridiculously successful and spurs a huge amount of development," says Liz Salerno, director of industry analysis for the American Wind Energy Association.
Even capital-constrained financial giant Citigroup has been drawn to wind power. In August, it made a $120 million investment in a large wind farm under construction in the rolling hills of northern Pennsylvania. The project, called Armenia Mountain by developer AES Corp., will deliver about 100.5 megawatts of power-generation capacity from 67 turbines, each the size of a 20-story building.
The quick returns provided by the cash grant "made it an attractive investment option," said Sandip Sen, Citi's global head of alternative energy.
It's not just Wall Street banks that are attracted. Iberdrola SA, a Spanish company that is the world leader in renewable energy by capacity installed, said in July that it expects to tap $500 million in cash grants for U.S. wind projects. "We've been in contact with the Treasury Department and we think the $3 billion is a minimum-type number," said Ralph Curry, chief executive of Iberdrola's U.S. business unit.
The Treasury Department didn't return calls seeking comment.
Additional financing from the grants would potentially benefit major wind-farm developers such as Florida utility FPL Group Inc. and large-scale solar developer Edison International. It could also give a boost to manufacturers who make the turbine blades and solar panels, such as Vestas Wind Systems A/S and First Solar Inc.
Morgan Stanley recently made a $120 million investment in a Montana-based wind farm developed by Grupo Naturener SA. "The cash grants are a good deal for both developers and financial backers," says Martin Torres, a Morgan Stanley vice president who worked on the deal.
"If we have a quick recovery and we're going like gangbusters again, you could easily get to $10 billion in two years," says Kevin Book, managing director of ClearView Energy Partners LLC, a Washington consultant.
Write to Russell Gold at russell.gold@wsj.com

Climate Camp finally swings into action

Five days in and the campers admit things are a little boring – there are no more toilets to put up and the police have vanished. But a plan for direct action should put the zip back into things
The weather can't make up its mind, and the campers can't either. One minute the Climate Campers are convinced that this is the best climate camp ever, most welcoming, chilled-out and up-for-it atmosphere, and the next they're admitting that perhaps it feels a little flat and even – God forbid – a little bit boring.
Five days in and there are no more toilets to put up, no more drainage systems to figure out, no more marquees to erect. The camp neighbourhoods all have their kitchens working, the rotas are full, the water hasn't run out and no one has set fire to anything.
As for the police, they have been pretty much invisible, going so far as to reject the idea of training a light on the camp at night in case it's seen as "invasive". On Thursday there was a mobile police station parked 40 or so metres from the perimeter of the Climate Camp fence. By Sunday even that has gone. The police have vanished, gone to confiscate some drugs at the Notting Hill carnival or practise their handbrake turns on the M25.
And the campers admit that, actually, it feels a bit odd without them. After all, much though they may deny this, the police have actually been incredibly useful to Climate Camp – uniting the campers in the face of the common enemy, and keeping them in the headlines in the months between camps. Now members of the legal team are wandering around like lost souls. The hay-bale barricades erected around the gate earlier in the week have been dismantled and turned into comfy seats.
However, there is now a plan for some direct action which should put the zip back into things. Firstly, there will be a flash mob tomorrow at midday at City Airport. And then on Tuesday morning, campers who want to take part in an action will be split into groups for the Rambling Raffle of Resistance.
Before Climate Camp got going, the organisers published a list of their targets which included BP, the Bank of England, E.ON, and various government departments. Now all these targets will be put into a hat, and the campers will fan out to target them.
Given that the full title of the camp is the "camp for climate action", it will be a relief to supporters of the camp to see that the camp is not just going to be about "movement building" and "educational workshops" this year. The police may even be hoving into sight again too. And just as it looked as if things were all getting a bit dull …

Technology Can Fight Global Warming

By BJøRN LOMBORG
We have precious little to show for nearly 20 years of efforts to prevent global warming. Promises in Rio de Janeiro in 1992 to cut carbon emissions went unfulfilled. Stronger pledges in Kyoto five years later failed to keep emissions in check. The only possible lesson is that agreements to reduce carbon emissions are costly, politically arduous and ultimately ineffective.
But this is a lesson many are hell-bent on ignoring, as politicians plan to gather again—this time in Copenhagen, Denmark, in December—to negotiate a new carbon-emissions treaty. Even if they manage to bridge their differences and sign a deal, there is a strong likelihood that tomorrow's politicians will fail to deliver.
Global warming does not just require action; it requires effective action. Otherwise we are just squandering time.
To inform the debate, the Copenhagen Consensus Center has commissioned research looking at the costs and benefits of all the policy options. For example, internationally renowned climate economist Richard Tol of Ireland's Economic and Social Research Institute finds that a low carbon tax of $2 a metric ton is the only carbon reduction policy that would make economic sense. But his research demonstrates the futility of trying to use carbon cuts to keep temperature increases under two degrees Celsius, which many argue would avoid the worst of climate change's impacts.
Some economic models find that target impossible to reach without drastic action, like cutting the world population by a third. Other models show that achieving the target by a high CO2 tax would reduce world GDP a staggering 12.9% in 2100—the equivalent of $40 trillion a year.
Some may claim that global warming will be so terrible that a 12.9% reduction in GDP is a small price to pay. But consider that the majority of economic models show that unconstrained global warming would cost rich nations around 2% of GDP and poor countries around 5% by 2100.
Even those figures are an overstatement. A group of climate economists at the University of Venice led by Carlo Carraro looked closely at how people will adapt to climate change. Their research for the Copenhagen Consensus Center showed that farmers in areas with less water for agriculture could use more drip irrigation, for example, while those with more water will grow more crops.
Taking a variety of natural, so-called market adaptations into account, the Carraro research shows we will acclimatize to the negative impacts of global warming and exploit the positive changes, actually creating 0.1% increase in GDP in 2100 among the member countries of the Organization for Economic Cooperation and Development. In poor countries, market adaptation will reduce climate change-related losses to 2.9% of GDP. This remains a significant, negative effect. The real challenge of global warming lies in tackling its impact on the Third World. Yet adaptation has other benefits. If we prepare societies for more ferocious hurricanes in the future, we also help them to cope better with today's extreme weather.
This does not mean, however, that we should ignore rising greenhouse-gas emissions. Research for the Copenhagen Consensus Center by Claudia Kemfert of German Institute for Economic Research in Berlin shows that in terms of reducing climate damage, reducing methane emissions is cheaper than reducing C02 emissions, and—because methane is a much shorter-lived gas—its mitigation could do a lot to prevent some of the worst of short-term warming. Other research papers highlight the advantages of planting more trees and protecting the forests we have to absorb C02 and cut greenhouse gases.
Other more speculative approaches deserve consideration. In groundbreaking research, J. Eric Bickel, an economist and engineer at the University of Texas, and Lee Lane, a researcher at the American Enterprise Institute, study the costs and benefits of climate engineering. One proposal would have boats spray seawater droplets into clouds above the sea to make them reflect more sunlight back into space—augmenting the natural process where evaporating ocean sea salt helps to provide tiny particles for clouds to form around.
Remarkably, Mr. Bickel finds that about $9 billion spent developing this so-called marine cloud whitening technology might be able to cancel out this century's global warming. The benefits—from preventing the temperature increase—would add up to about $20 trillion.
Climate engineering raises ethical concerns. But if we care most about avoiding warmer temperatures, we cannot avoid considering a simple, cost-effective approach that shows so much promise.
Nothing short of a technological revolution is required to end our reliance on fossil fuel—and we are not even close to getting this revolution started. Economists Chris Green and Isabel Galiana from McGill University point out that nonfossil sources like nuclear, wind, solar and geothermal energy will—based on today's availability—get us less than halfway toward a path of stable carbon emissions by 2050, and only a tiny fraction of the way towards stabilization by 2100.
A high carbon tax will simply hurt growth if alternative technology is not ready, making us all worse off. Mr. Green proposes that policy makers abandon carbon-reduction negotiations and make agreements to seriously invest in research and development. Mr. Green's research suggests that investing about $100 billion annually in non-carbon-based-energy research could result in essentially stopping global warming within a century or so.
A technology-led effort would have a much greater chance of actually tackling climate change. It would also have a much greater chance of political success, since countries that fear signing on to costly emission targets are more likely to embrace the cheaper, smarter path of innovation.
Cutting emissions of greenhouse gases is not the only answer to global warming. This week, a group of Nobel Laureate economists will gather at Georgetown University to consider all of the new research and identify the solutions that are most effective. Hopefully, their results will influence debate and help shift decision makers away from a narrow focus on one, deeply flawed response to global warming.
Our generation will not be judged on the brilliance of our rhetoric about global warming, or on the depth of our concern. We will be judged on whether or not we stop the suffering that global warming will cause. Politicians need to stop promising the moon, and start looking at the most effective ways to help planet Earth.—Mr. Lomborg teaches at the Copenhagen Business School and is director of the Copenhagen Consensus Center. He is the author of "Cool It: The Skeptical Environmentalist's Guide to Global Warming."Printed in The Wall Street Journal Europe, page 14

How green socialism can save the UK

Britain is ideally placed to lead the world on renewable energy. But a free market lacks the nerve to avert climate change crisis

Neal Lawson
guardian.co.uk, Sunday 30 August 2009 09.00 BST

It may be a crisis that is too good to waste but we have to move fast to define and win support for a progressive response to the failures of the market. But a new socialism can only be built on the politics of sustainability.
We must remember that it is not just banks that have failed. Two years into the worst economic crisis since the 1930s, with more than 2.4 million already without work, the official closure earlier this month of Britain's only wind turbine blade manufacturing plant, Vestas, is a sharp reminder of the failure of blind reliance on free markets to solve the economic and climate change crises. The plant's closure, with the loss of 400 jobs, was blamed on the slow pace of growth in the UK's wind turbine market and the drawn out local planning process to agree projects.
It has brought home the reality that the changes needed to protect us from catastrophic climate change are exactly the opportunities that can catalyse an upturn in our economy. Clean, fuel-free renewable energy is a huge international growth sector – allowing countries to achieve energy security, protect themselves against volatile fossil fuel prices and stimulate economic development without the consequence of dangerous carbon emissions that are the primary cause of climate change.
Worldwide in 2008, at $155bn (£95bn), more was invested in sustainable than conventional energy production. It is no coincidence that it is the world's most economically dynamic countries – such as Germany and China – that are shaping markets and driving investment to benefit from an almost exponential growth in renewable technologies.
Britain almost couldn't be better placed to profit from this emergent sector. We are one of the windiest countries anywhere in the world. We already have engineering expertise for offshore windfarms from exploiting our dwindling gas and oil reserves. The skill sets of our ailing car manufacturing industry, together with our aerospace industry, are easily transferable to wind turbine manufacturing. Research from the business advisory group the Carbon Trust shows that by 2020, the UK could capture 45% of the global offshore wind energy market, and that by 2050 our wind energy industry alone could be worth £65bn to the UK economy. Our badly hit construction sector is well placed to lead the energy efficiency revolution needed for our aged housing and public building stock. The UK wave and tidal power research and development industry is already a world leader.
We have a serious road map to deliver some of these economic and climate solutions set out by the energy and climate change secretary, Ed Miliband, in July's Low Carbon Transition Plan and Renewable Energy Strategy. The plan, which rhetorically at least has cross-party support, could create up to half a million more jobs in the UK. But, as a legacy of the free-market fundamentalist, non-strategic approach of previous energy ministers, the UK still languishes near the bottom of Europe's renewable energy league table. The sector in the UK has been hit hard by the slump in investment, including problems accessing finance.
What we need now is support for the scale of investment needed to jump start the industry, and confidence that the bumper crop of neo-Thatcherite Tory MPs heading for parliament next spring will let more than a tiny handful of wind turbines through the planning process. Figures from the Department of Energy and Climate Change show Conservative-run councils have been blocking three times as many windfarms as they approve. Unless David Cameron publicly commits to meeting the government's target to generate 15% of energy from renewable sources by 2020 – and sets out a convincing strategy for how this will be achieved – his blue-green agenda will look to the public and investors like nasty party brand decontamination rather than long-term commitment.
Bold Keynesian bailouts by Alistair Darling and Lord Mandelson of other parts of the economy, notably the finance sector and car industries, have saved them from catastrophe. Along with other major bailouts internationally, they have also ended the disastrous era where state intervention was taboo. But, only £405m was allocated in the budget for developing green industries – just £108m of which is for direct funding of renewable energy development. Even the failed RBS bankers reportedly won £775m for bonuses from the chancellor. This is still nowhere near the scale of support needed capitalise on the competitive advantage we could have in clean energy.
The passion of the protesting workers and the obvious synergy of economic and environmental interests has helped to make the campaign against the Vestas plant closure a cause celebre for both the trade union and environmental movements this summer. In other parts of Europe and the US the benefits to ordinary working people are already manifest – new skilled jobs, training, more comfortable insulated homes, measures to alleviate fuel poverty and protection from spikes in fossil fuel bills. These are the kind of benefits that can be achieved here too, but only with the kind of ambition and sustained, political commitment that will attract rapid investment and overcome a knee-jerk rejection of windfarm developments.
The stakes are too high to left to anonymous free market forces driven by fossil fuel and nuclear interests. The economic cost of inaction – laid out in the authoritative Stern Review report – is bleak. Stern estimated the cost to the world economy of unabated climate change would be around 5% to 20% of gross domestic product per year – a figure that would dwarf the cost of the banking crisis. An alliance of red and green politics would transform the landscape of Britain. The moment to do it is now.