MARKET BETS ON NEW ENERGY, UTILITIES FIGHT IT

Predicted action on the energy bill did not materialize Wednesday. Speculation is that the White House is taking a close look at how the $21 billion at play is being allocated. A letter from Speaker of the House Nancy Pelosi to White House spokesman Al Hubbard referred to a need for “homegrown renewable fuels and domestic renewable energy." Is this a signal about a compromise on biofuels?

Or was the floor debate simply delayed to allow the brewing scandal about the information on Iran’s nuclear weapons program in the National Intelligence Estimate (What did the President know and when did he know it?) time to develop?

Meanwhile Wall Street investors, spurred by rumors that Speaker of the House Pelosi had shepherded the $21 billion for New Energy through, turned alternative energy company stocks hotter than Paris Hilton’s miniskirt.

Nobody really knows if the bill can sustain the $21 billion for renewable fuels, plug-in hybrids, efficiency measures, Production tax Credits (PTCs), Investment Tax Credits (ITCs) and the national Renewable Energy Standard (RES) requiring utilities to obtain 15% of their electricity from renewable sources by 2020. But clearly investors are betting Speaker Pelosi means business.

This older EIA study and another from this year on a 15% standard both show benefits to ratepayers from a national Renewable Electricity Standard (RES). (click to enlarge)

Utilities, meanwhile, are bringing the full force of their considerable lobbying might down against the RES. Not even the provision allowing them to get 4% of the 15% from efficiency measures is abating their drive to kill the provision. Utilities and utility lobbies insist the RES would be an economic burden despite any number of studies, including those from the Department of Energy’s Energy Information Administration concluding otherwise. (See Impacts of a 15-Percent Renewable Portfolio Standard and Capturing the Energy Opportunity)

Pelosi now brings the bill into open battle against representatives of the biggest financial interests in the country. The White House has already promised to veto any legislation coming through the Congress that undercuts longstanding subsidies to the fossil fuel industries or challenges the utilities. Is there a way through the maze?

Citizens make can make an impact: VOTE SOLAR, POWER OF WIND and U.S. PIRG show how.

Renewable energy stocks soar on energy bill hopes
Steve James, Doris Frankel and Chris Baltimore (with Jeffrey Benkoe and Andre Grenon), December 4, 2007 (Reuters via Yahoo News)
and
Energy bill sets off alarm at utilities
Marilyn Geewax, December 6, 2007 (Atlanta Journal-Constitution)

WHO
LDK Solar Co Ltd, Trina Solar Ltd, Solarfun Power Holdings Co Ltd, China Sunergy Co Ltd, Canadian Solar Inc and other New Energy stocks; Southern Company

The unmistakable pattern is that when public policy supports New Energy, it booms. (click to enlarge)

WHAT
- Shares of New Energy companies rose in value on rumors the US Congress is planning to put through energy legislation mandating and incentivizing New Energy.
- Southern Company and other utilities are vigorously lobbying to block the national RES.

WHEN
- Stock price reports are from December 4.
- Utilities, and especially Southern Company, have resisted the national RES all along. Their lobbying efforts were central in the defeat of the provision in June’s Senate energy bill fight. They failed to support a majority in July’s House energy bill fight.

WHERE
- Investors’ attention was reportedly largely focused on the news that the energy bill would be debated December 5 or 6 and voted on before the holiday recess.
- The House is expected to pass the legislation, including the RES provision. In the Senate, conservative Republicans are thought to have enough votes (more than 40) to close floor debate on the RES provision and prevent it from being considered with the threat of a filibuster.
- If there are developments between Speaker Pelosi and the White House that might prevent the President from exercising his veto to prevent Congress from cutting back tax breaks and subsidies to the fossil fuels industry, there are no clear indications yet.

WHY
- LDK Solar Co Ltd manufactures solar wafers. Many of the companies cited as gaining value are solar energy firms. Some cover up-, mid- or downstream sections of the solar energy business and some are vertically integrated full-service companies.
- Reports that Congressional leaders had reached agreement on new fuel standards spurred investing, as did reports that Democratic leaders would fight to pass incentives for new Energy.
- The most controversial aspects of the energy bill are the RES and $21 billion in incentives for New Energy funded partially at the expense of a $13 billion cutback in incentives to the fossil fuels industry.

The EIA also found that greenhouse gas emissions fall with a 15% national RES. (click to enlarge)

QUOTES
- William Lefkowitz, options strategist, NY brokerage vFinance Investments: "The House of Representatives is expected to vote on an energy bill within the next two days. An energy bill before Congress is expected to move quickly…The main issue is alternative energy. If approved this is perceived as a positive for LDK and other stocks in the sector…LDK calls, conveying the right to buy the stock as high as $80 per share, are active this morning."
- Mike Tyndall, utility spokesman: "Southern Co. does not oppose renewable energy…We are opposed to mandated federal proposals that don't take into account regional differences."
- Tony Fratto, spokesman, White House: "We obviously have problems with the tax revisions [and the renewable-energy provisions but] one of the difficulties is that people are dealing with incomplete information of what exactly is in the bill."