http://www.reuters.com/article/latestCrisis/idUSN18449059

Reporting by Timothy Gardner

RMorgan Stanley sees $1 trillion green mkt by 2030
Thu Oct 18, 2007 12:28pm EDT

Global sales from clean energy sources like wind, solar and geothermal power and biofuels could grow to as much as $1 trillion a year by 2030, U.S. bank Morgan Stanley (MS.N: Quote, Profile, Research) has estimated.

Global population growth and soaring prices for fossil fuels are driving the market, along with dropping costs in clean energy and concern about energy security and climate change, the bank said in a research note issued on Wednesday.

On the market’s upside, revenues could reach $505 billion in 2020, or nearly nine times the level in 2005, and hit $1.02 trillion 10 years later, the bank said.

As a comparison, the gross domestic product of the the United States, the world’s largest economy, hit $13.2 trillion last year.

“The global risks posed by climate change are driving spending and investment in clean energy solutions, which (unlike the oil shock that spawned the first wave of energy solutions in the 1970s) is durable and accelerating,” Morgan Stanley said in the note.

The bank also initiated coverage of the clean energy industry. It rated the following companies as overweight-volatile: thin film solar company First Solar Inc (FSLR.O: Quote, Profile, Research), solar company SunPower Corp (SPWR.O: Quote, Profile, Research), biofuel company VeraSun Energy Corp. (VSE.N: Quote, Profile, Research), and emissions reducers Fuel Tech Inc (FTEK.O: Quote, Profile, Research).

The report cautioned that sales could be reduced in the unlikely event that world governments change direction on climate change policy and stop taking steps to monetize greenhouse gas emissions. Peace in the Middle East could also push down oil prices, which could slow growth.

Shares in renewable energy companies also could be volatile in the short term, it said.

The bank was particularly bullish on solar power. Market penetration of solar in electricity generation could rise from levels almost too small to measure in 2005 to 11.2 percent in 2030, while wind power could go from 0.9 percent to 9.6 percent by 2030, it said.

Solar would take more market share as costs decline for things like panels that convert the sun’s rays into power. The cost of solar power should sink from $8 per Gigawatt installed in 2005 to $1.60 per GW by 2030. Wind power, which was $2 per GW. would cost about the same through 2030, it said.

Penetration of biofuels like ethanol and biodiesel in transportation could grow from around 1 percent in 2005 to 21 percent in 2030, it said, assuming cars boost fuel efficiency.

Morgan Stanley was not the only bank this week to highlight green energy. Government efforts to tackle climate change are creating a “megatrend” investment opportunity that should tempt even those skeptical about the nature and pace of global warming, Deutsche Bank analysts said on Thursday in China.

Deutsche Bank has attracted about $8.55 billion into climate change funds, which target companies that cut greenhouse gases or help people adapt to a warmer world, in sectors from agriculture to power and construction.

Global investment in renewable energies jumped to a record $100 billion in 2006 and will likely rise to about $120 billion in 2007, the U.N. Environment Program said this summer.

Morgan Stanley owned 1 percent or more of a class of common equity securities of green energy companies Aventine Renewable Energy and ReneSola and within the last 12 months managed or co-managed public offerings of securities for EnerNOC, First Solar Inc, Motech, SunPower Corp. and VeraSun Energy.

The bank said late last year it planned to invest some $3 billion in carbon markets over the next five years.

(Additional reporting by Emma Graham-Harrison in Beijing)

© Reuters2007All rights reserved

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OSLO, Norway – Former Vice President Al Gore and the U.N.’s
Intergovernmental Panel on Climate Change won the 2007 Nobel Peace Prize
Friday for their efforts to spread awareness of man-made climate change and
lay the foundations for counteracting it.

I am deeply honored to receive the Nobel Peace Prize,” Gore said. “We face a
true planetary emergency. The climate crisis is not a political issue, it is
a moral and spiritual challenge to all of humanity.”

Gore’s film “An Inconvenient Truth,” a documentary on global warming, won an
Academy Award this year and he had been widely expected to win the prize.
The Norwegian Nobel Committee said global warming, “may induce large-scale
migration and lead to greater competition for the earth’s resources. Such
changes will place particularly heavy burdens on the world’s most vulnerable
countries. There may be increased danger of violent conflicts and wars,
within and between states.”

Gore said he would donate his share of the $1.5 million that accompanies the
prize to the Alliance for Climate Protection, a bipartisan nonprofit
organization devoted to conveying the urgency of solving the climate crisis.

“His strong commitment, reflected in political activity, lectures, films and
books, has strengthened the struggle against climate change,” the Nobel
citation said. “He is probably the single individual who has done most to
create greater worldwide understanding of the measures that need to be
adopted.”

Gore supporters have been raising hundreds of thousands of dollars for
petition drives and advertising in an effort to lure him into the Democratic
presidential primaries. One group, Draftgore.com, ran a full-page open
letter to Gore in Wednesday’s New York Times, imploring him to get into the
race.

Gore, 59, has been coy, saying repeatedly he’s not running for the
Democratic presidential nomination in 2008, without ever closing that door
completely.

He was the Democratic nominee in 2000 and won the general election popular
vote. However, Gore lost the electoral vote to George W. Bush after a legal
challenge to the Florida result that was decided by the Supreme Court.

Peace Prize committee chairman Ole Danbolt Mjoes said a possible Gore
presidential run was not his concern.

“I want this prize to have everyone … every human being, asking what they
should do,” Mjoes said. “What he (Gore) decides to do from here is his
personal decision.”

Mjoes reiterated repeatedly that the prize was not aimed at singling out the
Bush administration and its position on global warming.

“A peace prize is never a criticism of anything. A peace prize is a positive
message and support to all those champions of peace in the world.”

The last American to win the prize or share it was former President Carter
in 2002.
The Nobel committee cited the Panel on Climate Change for two decades of
scientific reports that have “created an ever-broader informed consensus
about the connection between human activities and global warming.”

Members of the panel, a network of 2,000 scientists, were surprised that it
was chosen to share the honor with Gore, a spokeswoman said.

“We would have been happy even if he had received it alone because it is a
recognition of the importance of this issue,” spokeswoman Carola Traverso
Saibante said.

The panel forecast this year that all regions of the world will be affected
by climate warming and that a third of the Earth’s species will vanish if
global temperatures continue to rise until they are 3.6 degrees above the
average temperature in the 1980s and ’90s.

“Decisive action in the next decade can still avoid some of the most
catastrophic scenarios the IPCC has forecast,” said Yvo de Boer, the U.N.’s
top climate official.

He urged consensus among the United States and other countries on attacking
the problem.

Climate change has moved high on the international agenda this year. The
U.N. climate panel has been releasing reports, talks on a replacement for
the 1997 Kyoto Protocol on climate are set to resume and on Europe’s
northern fringe, where the awards committee works, there is growing concern
about the melting Arctic.

Jan Egeland, a Norwegian peace mediator and former U.N. undersecretary for
humanitarian affairs, also called climate change more than an environmental
issue.

“It is a question of war and peace,” said Egeland, now director of the
Norwegian Institute of International Affairs in Oslo. “We’re already seeing
the first climate wars, in the Sahel belt of Africa.” He said nomads and
herders are in conflict with farmers because the changing climate has
brought drought and a shortage of fertile lands.

The committee often uses the coveted prize to cast the global spotlight on a
relatively little-known person or cause. Since Gore already has a high
profile some had doubted that the committee would bestow the prize on him
“because he does not need it.”

Gore’s climate change effort has had its share of criticism.

A British judge said in a ruling published Wednesday that some assertions in
his documentary were not supported by scientific evidence. The case involved
a challenge from a school official who did not want the film shown to
students.

The ruling detailed High Court Judge Michael Burton’s decision this month to
allow screenings of the film in English secondary schools. The judge said
that written guidance to teachers, designed to ensure Gore’s views are not
presented uncritically, must accompany the screenings.

In recent years, the Nobel committee has broadened the interpretation of
peacemaking and disarmament efforts outlined by Swedish industrialist Alfred
Nobel in creating the prize with his 1895 will. The prize now often also
recognizes human rights, democracy, elimination of poverty, sharing
resources and the environment.

Two of the past three prizes have been untraditional, with the 2004 award to
Kenya environmentalist Wangari Maathai and last year’s award to Bangladeshi
economist Muhammad Yunus and his Grameen Bank, which makes to micro-loans to
the country’s poor.
The prize also includes a gold medal and a diploma.
The prize for economics will be announced Monday.

http://money.cnn.com/2007/10/03/news/companies/sunpower_solar.fortune/index.htm?section=money_topstories

For solar power, the future looks bright
Solar energy is now very real. And at hot companies like SunPower, the ‘green’ that matters is money – by the billions, writes Fortune’s Marc Gunther.
By Marc Gunther, Fortune
October 4 2007: 3:33 AM EDT

(Fortune Magazine) — Several years ago a solar-powered, propeller-driven unmanned aircraft named Helios took off on a test flight from the Hawaiian island of Kauai. NASA had designed Helios to be powered all day by sunlight and all night by fuel cells. The “eternal airplane,” it was called.

Alas, Helios failed to live up to that inspired bit of branding. Thirty minutes after takeoff, the $15 million flying machine broke up and fluttered into the Pacific Ocean. “It was kind of sad,” recalls Dick Swanson, who designed the solar cells on Helios, “although in retrospect it wasn’t a technology that has much practical value.”

Rodgers is a rarity: a caustic enviro-skeptic and alternative energy tycoon.

Swanson, an ex-Stanford prof, spent years on solar tech.

Swanson, a brainy, soft-spoken 62-year-old engineer, gave up a tenured position on the faculty at Stanford to start a solar-energy company in 1985. Since then he has watched other bright ideas and impractical plans come crashing down – that was the story of the solar business for years.

This old solar-optimized house
His company, SunPower, was no exception. It lived off research grants and boutique assignments, like making solar cells for a Honda automobile that won a 1,700-mile race across Australia. “We did anything we could to survive,” Swanson says.

Today, like the rest of the solar energy industry, SunPower is heating up. With electricity prices rising, worries about global warming mounting, and the cost of solar energy falling, the business of making electricity from the sun is about to go mainstream in a big way.

The Holy Grail of solar is a concept called “grid parity” – meaning that it costs no more to generate your own solar energy than it does to buy electricity retail, off the grid – and there’s smart money betting that solar will get there soon. In the case of SunPower, that money comes from a legendary Silicon Valley character named T.J. Rodgers, whom we’ll meet shortly.

Once given up for dead, SunPower (Charts), which makes and installs solar photovoltaic panels for businesses and homes, expects to generate revenues of $1 billion to $1.2 billion and profits of $146 million to $162 million next year. Its customers include Wal-Mart, Johnson & Johnson, Microsoft, Macy’s, Tiffany, FedEx, Toyota, Target, Lowe’s, the governor of Colorado (who has solar panels on the roof of his mansion), and the Department of Defense (which uses solar energy to power Nellis Air Force Base in Nevada, but not its planes).

Since going public two years ago, SunPower’s stock price has grown by about 450%, from $18 a share to $82 when Fortune went to press, giving the company a market capitalization of nearly $7 billion. That’s a little bigger than Whole Foods Market.

While the solar industry as a whole remains small – less than 1% of the electricity in the U.S. – it’s exploding. The market for solar photovoltaic (PV) panels, which use cells made of crystalline silicon to turn sunlight into electricity, has grown by an average of 42% annually since 2002. Industry leaders, most based in Japan and Germany, are ramping up production, as are Chinese manufacturers like Suntech, whose founder and CEO, Dr. Zhengrong Shi, is one of China’s richest men.

Investors bask in solar power’s sun
Big companies, including BP (Charts), General Electric (Charts, Fortune 500), Mitsubishi, Sanyo, Sharp, and Shell (Charts), all want to grow their solar businesses. In Silicon Valley, meanwhile, venture capital investors like John Doerr and Vinod Khosla, entrepreneur Bill Gross, and Google founders Larry Page and Sergey Brin are backing startups that claim they will revolutionize the industry.

According to John Cavalier, who is chairman of the energy group at Credit Suisse, the market value of the world’s publicly traded solar companies stood at about $1 billion in 2004. Now, after a slew of IPOs, they are worth about $71 billion. If the U.S. enacts legislation to counter global warming and it adds to the cost of making electricity from coal, natural gas, and oil, solar energy will be among the winners. “The opportunity for solar companies is absolutely tremendous,” Cavalier says.

An industry leader
SunPower stands out for several reasons. It’s arguably the leading U.S. solar company, its solar cells are currently the industry’s most efficient, and it is vertically integrated, meaning that it makes both its solar cells and the panels on which they are mounted, and designs and installs systems for customers.

Little known outside the industry, the company wants to build a consumer brand. “We’d like SunPower and solar energy to be synonymous,” says Tom Werner, the chief executive.

At least two things stand in its way. The first is competition, of which there is plenty. The solar PV industry remains fragmented, with as many as 100 manufacturers working to drive down costs. Sharp is the leading one, followed by a German firm called Q-Cells, Kyocera, Suntech, and Sanyo, with SunPower ranked tenth, according to Paula Mints, principal analyst for solar with Navigant Consulting’s PV Service Program.

The other obstacle facing SunPower and the industry is that it still costs too much to make electricity from the sun. Prices vary widely, but it costs about 25 to 35 cents to produce a kilowatt-hour of electricity from solar; retail electricity prices average 11 cents in the U.S. but can be twice that in parts of California, New York, and Connecticut.

Today’s biggest markets for solar PV are Germany and Japan, with the former accounting for more than 50% of global demand. That’s not because it’s always sunny in Düsseldorf; it’s because government policy requires utilities to pay above-market prices for solar-generated electricity.

“Absent incentives, I don’t think there would be a solar business today,” says Stephen O’Rourke, a Deutsche Bank research analyst. But O’Rourke believes that solar PV, without subsidies, could reach grid parity in much of the U.S. in four to eight years. “No technological breakthroughs are required to get there,” he says. “It’s a matter of incremental improvements.” And when it happens, it will be huge.

“I am interested in green,” T.J. Rodgers declares. “I have shareholders.” The unlikely savior of SunPower, Rodgers is the pugnacious 59-year-old CEO of a Silicon Valley chipmaker called Cypress Semiconductor (Charts). He is also a staunch opponent of government subsidies and skeptical about global warming.

“The group that is most vehement about global warming represent to me some of the worst people in the world,” Rodgers tells me when we meet at Cypress’s headquarters in San Jose. “I dislike them so much, it’s difficult to listen to what they say objectively.” What about Al Gore? “I wouldn’t trust Al Gore as far as I can throw him, which isn’t very far – he’s gotten a little hefty since he left office.”

And CEOs like GE’s Jeff Immelt, Wal-Mart’s Lee Scott, and Peter Darbee of PG&E, who worry about climate change? “Every one of the names you just mentioned would flunk his ass in the most rudimentary test about global warming.” Rodgers notes that he and Immelt both went to Dartmouth. (Rodgers is a trustee, currently battling the college administration over who elects the board.) “Jeff Immelt played football,” he says. “I graduated No. 1 in physics.”

All righty then. Let the record show that Rodgers did not rescue SunPower to save the planet. He did so because of Dick Swanson and because he believes there’s money to be made from solar power.

Rodgers and Swanson were Stanford grad students together in the 1970s, when both studied with Nobel laureate William Shockley. “There are few people in my life who I run into who are clearly smarter than me,” Rodgers says. “At Stanford there were two: Shockley and Swanson.”

With SunPower running out of money in 2000, Swanson went to his old colleague. Rodgers was intrigued. But before committing, he set out to get a handle on the business, looking into putting solar cells on the roof of Cypress’s new headquarters. After running the numbers, he figured that they would generate enough electricity to pay for themselves in about seven years; he ordered panels from Sanyo and Shell.

SunPower did not yet have a commercial product, but Rodgers admired its work for Helios – the plane set a world altitude record of 96,863 feet before its unfortunate demise (unrelated to its solar panels), and he was impressed by the efficiency ratings of its cells. He was not impressed by the company’s manufacturing operation, however. “No insult intended – they didn’t have a clue how to run a fab,” he says. But Cypress, which has three efficient chip plants in the U.S. and the Philippines, knew how to fix that.

The timing was perfect. Researchers at Bell Labs developed solar PV cells in the 1950s. They had been deployed since the 1970s, mostly off the grid. But it took the Japanese and German subsidies of the 1990s to make solar a business; since then, economies of scale have driven down costs as prices for natural gas have risen.

Arnold Schwarzenegger, a fan of solar, soon became California’s governor; last year he signed a law that calls for a million solar roofs and provides $3.2 billion in rebates for solar customers.

The industry, meanwhile, revamped its business model. For years companies, including SunPower, aimed to develop large-scale solar farms in remote, sunny locations to compete with big fossil-fuel generators that sell electricity to utilities. Solar thermal power plants, which use the sun’s heat to turn water into steam that drives turbines, continue to build utility-scale plants.

Eco-companies customers love
But solar PV panels are now mostly sold to businesses and homeowners. “The killer app that changed the industry was the realization that the natural role for PV is distributed power,” Swanson explains. “You can generate the electricity where it’s needed. You don’t need a big solar farm in the desert anymore.”

This is obvious now, but it was far from clear when Rodgers first asked Cypress’s board of directors to invest in SunPower. They declined. So he loaned the company $750,000 of his own money on the understanding that an extreme makeover would follow. His message was unambiguous: “You’re going to have to shut down your American fab and put one in a low-cost area. You’re going to have to lose half of your employees, some of whom you love. You’re going to have to bring in new management. And if you are willing to do all of that, then and only then will you turn it into a real company.”

It took some doing. “We had to make a very rapid transition from a handmade, boutique solar-cell mentality to full-blown, state-of-the-art manufacturing,” Swanson says. The company transplanted its manufacturing line from Palo Alto to a Cypress plant in Texas and then to a newly built fab in a suburb of Manila, disrupting the lives of engineers and their families. Rodgers sent some of his best Cypress executives over to SunPower, including Tom Werner, a longtime technology executive and Ironman triathlete who became CEO.

In 2002, Rodgers convinced Cypress’s board to get in on this solar action – and the company made its first $9 million investment in SunPower. Two years later Rodgers persuaded his board to buy the rest of the company. It turned out to be a smart move: Cypress has spent $168 million to buy SunPower and invest in plant, equipment, and startup costs.

The 2005 IPO, as noted, was a hit. Last May, Cypress sold 7.5 million shares, bringing in $437 million. As of June 30, Cypress held about 44.5 million shares – representing about 55% of SunPower on a diluted basis – worth about $3.6 billion. The amazing upshot here is that the company’s holdings in SunPower account for more than 80% of the market value of Cypress, which has been in business since 1982.

A sunny dispostion
It must be noted that SunPower’s valuation reflects a very rosy view of its future. Shares are trading at about 32 times projected 2008 earnings. Besides Cypress, major shareholders include Legg Mason, BlackRock Group, Deutsche Bank, and Janus. “You have mainstream, sophisticated, long-term investors buying into the SunPower business plan,” Werner says.

One reason for the optimism is that when you take federal and state subsidies into account, solar is already competitive. SunPower offers some commercial customers a deal that sounds too good to be true – no upfront costs, instant savings on their electricity bills, and long-term price stability.

That’s because of a financing mechanism known as a power purchase agreement, or PPA, that’s increasingly popular in the solar business. Instead of making a capital investment of $1 million or more in solar panels, a big customer like Wal-Mart can sign a ten- or 20-year agreement to buy at a fixed price electricity generated by the solar panels on its roof. Ownership of the solar installation is retained by SunPower or sold to an institutional investor.

No wonder retail customers are clamoring for more: When Wal-Mart entered into PPAs with SunPower, BP Solar, and Sun Edison covering a total of 22 sites in California and Hawaii, David Ozment, Wal-Mart’s director of energy, said the retailer would begin saving money “as soon as the first day of operation.”

Solar IPOs shine
Can homeowners obtain such risk-free deals? Sadly – annoyingly – no. They can, however, recoup some of their capital costs in states with “net metering,” a policy that requires utilities to credit their customers for electricity they supply to the grid. So, for example, on a sunny day, if a house is empty and not running air conditioning, the homeowner’s excess electricity goes back to the grid, and the utility prorates the bill. The meter literally spins in reverse. (For a home solar primer, see “This old solar-optimized house.”)

Because demand for electricity frequently peaks during hot summer days, utilities benefit, since they can buy solar electricity from thousands of homeowners and won’t need as many power plants. That at least is the radical vision of solar enthusiasts, who note that the supply of solar energy is inexhaustible and available to literally every nation under the sun.

Indeed, to overcome a major drawback of solar power – that it’s available only when the sun is shining – some dream of building a global power grid so that the sunny side of the earth could supply the dark.

Well, maybe someday. But the more immediate task for SunPower and its rivals is to drive down costs so that solar energy can compete with fossil fuels and nuclear power without subsidies. Rodgers welcomes that fight – he’d like the government out of the energy business entirely. Werner says SunPower can cut its costs in half by 2012, getting the price of solar down to about 12 cents a kilowatt-hour – reaching grid parity with much of the nation.

For Swanson, who has spent his adult life working on solar power, more is at stake than the company’s future. He’s looked at the science of climate change and has visions of diasporas, conflicts, and starvation. “Given the huge downside risk,” he says, “I can’t understand how one cannot be worried.”

Late in September, more than 10,000 people gathered in Long Beach, Calif., for the solar industry’s big annual conference. (The same event drew only 800 people just three years ago.) They listened to celebrities like Ted Turner and Larry Hagman, pondered a dizzying array of solar products and technologies, and buzzed about takeover rumors and rising stock prices.

Could the excitement over solar power turn into another bubble? Credit Suisse’s Cavalier, who’s been in the energy business for 24 years, doesn’t think so. “The reason I do not believe it is a bubble is that I honestly believe that climate change and greenhouse gases are not going away,” he says. “And there are a lot of cars yet to be driven and a lot of lights still to be lit all around the world.”

We’ve seen one silicon revolution – it brought us PCs, the BlackBerry, and the iPod. Maybe a second is just around the corner.