Investing in the Future of Energy April 2011

8/6/2019 Investing in the Future of Energy April 2011

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obal Fund Exchange is a global

set management business

hich invests across all areas of

e New Energy Revolution.

this issue:

Solar Energy Investments

Development of the Smart Grid

Libyan Oil Production Halt

Surging Global Auto Sales

Agflation & Investing in Food

Water Security Nations at Risk

ur investment focus:

Clean Energy

Water

Agriculture

Traditional Energy

Natural Resources

Carbon & Emissions

Systematic Trading

Hedge Strategies

arn more:

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Energy Newslette

SPOTLIGHT ON: CLEAN ENERGY INVESTING

High Energy Prices, Middle East Unrest & Japan Crisis

Spark Resurgence in Global Clean Energy Investments

The combined effects of tumultuous energy markets, high oil prices, politic

turmoil in the Middle East and the aftermath of the Japanese nuclear crisis hav

prompted a resurgence in investor interest in the global clean energy industry.

In the United States, General Electric (GE) has embarked on an ambitio

$600MM plan to build the largest solar panel manufacturing facility in the Unite

States. Upon completion in 2013, the Colorado-based plant will have an annu

capacity of 400MW of production of thin-film solar photovoltaic panels.

The biggest challenge for solar is the cost of energy, said Victor Abate, VP o

GEs renewable energy business. For every point you can move [higher]

efficiency, you reduce the cost of the system by 10%. GE is targeting 12.8efficiency or higher in its cadmium telluride panels, an attractive lower-co

material than conventional silicon.

Similarly, the U.S. Department of Energy and Google are supporting a new sol

thermal plant in the California desert. Upon completion in 2013, the Ivanpa

Solar Electric Generating System will nearly double the amount of solar therm

electricity produced in the United States.

Investment flows into clean energy projects began in earnest last year as th

world emerged from recession. According to a new report from the Wor

Economic Forum (WEF), global investment in the clean energy industry defie

expectations in 2010 and rose 30% from 2009 levels. Bloomberg New Energ

Finance reports total investment in the sector reached $243 billion in 2010, $4

billion higher than was predicted, with $194 billion in committed stimulus fundin

from governments around the world.

Falling component costs have helped fuel this investment. Solar and wind a

becoming competitive with conventional fossil fuel energy in many parts of th

world - even without government subsidies.

In order to limit global temperature increases to below 2 degrees centigrade a

recommended by scientists, the WEF says investments in clean energy will nee

to rise to $500 billion a year.

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Investing in the Future of Ener

April 2011
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Germany achieved a record 32% electricity from combined re

time wind & solar generation on Feb 7, 2011. Many expect t

record to be broken again as the summer season approaches.

In 2010, renewable energy provided more electricity to t

German power grid than all gas-powered plants combined. It

fast approaching the percentage supplied by nuclear energy.

the wake ofJapans nuclear disaster, German Chancellor Ang

Merkel permanently closed two nuclear reactors and imposed

temporary moratorium on five others. This has unleashed

vigorous debate on the benefits vs. risks of nuclear power a

the future shape of the industry in Germany.

The downfall of nuclear in Germany may catalyze the rise

renewables, especially solar power. Despite recent reductio

in its feed-in-tariff program, Germany doubled its so

installations in 2010, installing 7,400MW of new capacity fro

over 250,000 individual systems. The percentage of PV

Germanys electricity supply is set to increase from 3% to 10

by 2020. The nation aims to cut costs in half by the same date

Smart Grid Deployment is Critical for

Secure Energy Future: IEAThe widespread deployment of smart grids is critical for

secure, cost-effective and clean energy future, says a ne

report published by the International Energy Agency (IEA).

In its Smart Grid Technology Roadmap, the IEA calls smart gr

a key enabling technology which will allow for more wid

spread and streamlined adoption of new low carbon ener

technologies, energy efficiency programs and electric vehicles

We need to see a much more aggressive investment in larg

scale regional pilots in order to deploy smart grids at the sca

they are needed, said IEA Executive Director Nobuo TanaGovernments need to establish clear and consistent policie

regulations and plans for electricity systems that will allo

innovative investment in smart grids.

The United States has taken new steps towards implementing

nation-wide smart grid. According to a new assessment fro

the Electric Power Research Institute (EPRI), modernizing t

United States electric system by implementing a smart g

could yield up to $2 trillion in benefits.

The EPRIs comprehensive cost/benefit analysis of smart g

implementation found the investment required for ninfrastructure, technologies and applications would likely r

between $338 and $476 billion. However, the EPRI expects t

benefits to far outweigh the costs, with expected benefits

the range of $1.3 to $2 trillion.

A more streamlined, efficient electricity grid would allow f

more reliable delivery of electricity, reduced waste, improv

security and better ability to incorporate energy fro

renewable sources like solar and wind, says the EPRI. W

more information about energy usage and greater pric

choices, the smart grid could also bring cost savings

consumers.

LEAN ENERGY NEWS

ew Project Catalyzes New Era of

enewables Investment in Gulf Region

lowing the successful financing of the Shams I solar power

oject in the United Arab Emirates, global ratings agency

ndard & Poors foresees a new era of investment in

ewable energy in the Gulf region. The new project is the

gle largest renewable energy installation in the region.

th $615MM in financing from a consortium of international

nks, the plant will be eligible for a new green payment

mpensation system where the Abu Dhabi government will

y the cost difference between the power produced from the

ar plant and that of other domestic conventional power

ducers. This sets a new precedent that could encourage

ther development.

e believe the Shams 1 project marks the start of a potential

w industry in renewable energy in the Gulf Cooperationuncil region, where renewables currently only represent

s than 1% of the total energy mix, said S&P credit analyst

im Nassif, noting that GCC nations face nearly $100 billion

new requirements for energy infrastructure investment to

et growing demand.

enewables Supply 17% of Germanys

ectricity in 2010 A New Record

newable energy in Germany is accelerating at a rapid rate.

est data shows renewable sources such as wind,

droelectric plants, solar and biogas provided nearly 17% of

Germanys electricity in 2010. This figure blows past the

vious target of 12.5% by 2010 and keeps Germany on track

achieve its 2030 target of 39% electricity from renewable

ergy sources.

e amount of solar power installed in Germany during the

nth of December 2010 alone was 50% higher than the total

ount of PV installed in the United States, and equal to the

ount installed in Japan in 2010. Analysts are calling this

ievement nothing short of startling.

Shams I is making history in the Gulf region


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RADITIONAL ENERGY NEWS

obal Natural Gas Reserves are 40% Higher

an Expected: EIA Study

al recoverable global gas reserves are 40% higher than

pected, according to staggering findings from the U.S. Energy

ormation Administration (EIA).

e majority of these natural gas resources are located in the

ted States and China, with notable reserves in Canada,

xico and South Africa and Argentina. The EIA map belowvides a visual representation of these key locations:

ed on the results of its recent study, the EIA estimates global

overable reserves of shale gas in the U.S. and 32 other

ions at 6,622 trillion cubic feet. When added to previous gas

erve estimates, the EIA now estimates total global gas

erves at an astounding 22.600 trillion cubic feet.

spite some continued concern over new drilling techniques

own as hydraulic fracturing or fracking, natural gas industry

byists and industry players say the EIAs impressive findings

evidence that shale [gas] will change the energy world.

Loss of Libyan Production & Continued

Regional Unrest Brings Oil to 2 Year High

Oil and energy markets have been in turmoil due to continu

political unrest in the Middle East and North Africa.

Recent trading has brought Brent crude prices to levels n

seen since the record high prices of 2008, at one point toppi

$126 a barrel a 2 1/2 year high point. The whole commod

complex seems to be on the boil again, said Edward Meir

MF Global, discussing the continued violence in Libya, Yem

and political unrest in Nigeria over delayed elections.

The situation in Libya has added pressure on OPEC to bo

production to make up for 1.6 million barrels per day of lo

capacity. Saudi Arabia has boosted production to fill this ga

but has admittedly found it difficult to replace the high-quali

light, sweet crude produced by Libya. Saudi Aramco saw o

tepid demand from refiners for extra barrels due to the qual

mismatch with lost Libyan supplies, said a report from t

International Energy Agency (IEA), which has called OPE

overall response to the Libya situation limited at best.

Spare capacity is eroding, said Barclays analyst Amrita SeUpward pressures on prices could well continue. Accord

to consumer inflation reports from China, India, the U.S. a

Eurozone nations, petroleum prices have risen for the nin

consecutive month for a total 14.4% rise since the beginning

the year. Former Saudi oil minister Sheikh Zaki Yamani h

warned that continued political unrest could push barrel pric

in the $200 $300 range.

These skyrocketing oil prices have prompted responses fro

global leaders such as UK Energy and Climate Secretary Ch

Huhne and Saudi Arabian Oil Minister Ali Ibrahim Al-Naimi.

Current oil prices do not reflect the realities of supply a

demand as they exist in the global energy market, said M

Huhne, who called for greater understanding betwe

consumer and producer countries in an effort to avo

inflation.

A map of global shale gas resources

hina, India & Brazil Lead as Global Auto Sales Trend Higher

ording to the April 2011 Short-Term Energy and Summer Fuels Outlook released by the U.S. Energy Informati

ministration (EIA), American drivers can expect to pay an average $3.86 per gallon during the 2011 driving season with

dicted peak of $3.91 per gallon by mid-summer. As a result, there has been renewed consumer enthusiasm for electric a

h-mileage vehicles in the United States, with President Obama reporting that the U.S. is on track to achieve 1 million electhicles on the road by 2015.

hough increasing gasoline costs are having an effect on the average American consumer, the effect has not been translated

erely to other parts of the world, where vehicle ownership is still on the rise. Sales of cars and light trucks is increasing rapi

he worlds fast growing nations like China, India and Brazil.

ring the month of March, Chinese vehicle sales rose 5.4% from March 2010 levels, to 1.82 million. From March 2009 to Mar

10, vehicle sales rose by 25%. In India, vehicle sales as of March 2011 rose 30% on the year to 1.98 million. Brazils Q1 sales

s and light vehicles rose 4.7% to 852,000. Auto sales in Turkey rose 76% to 181,631 vehicles during Q1, and Indone

orted a 25.2% increase from the year before.

many instances, these numbers represent first time auto purchases, as opposed to vehicles bought to replace older models.

se purchasing trends continue as expected, the total number of active vehicles on the worlds roads will increase sharply.


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GRICULTURE NEWS

vesting in Food to Hedge Against Inflation

bal food prices are still on the rise and agflation is a big

nt of concern all around the world. As a result, investors are

reasingly looking to food and agriculture investments as a

l to safeguard their portfolios during these tumultuous

es.

e United Nations Food and Agriculture Organization (UN FAO)

orts that the Food Price Index, which measures prices of aket of agricultural staples and commodities, has surpassed

2008 food crisis levels and is now at its highest point ever.

er the past year, there have been dramatic increases in the

ces of wheat, maize, corn, soybeans, rice, sugar and cotton

damental commodities that people need for basic survival.

oking past the short-term volatility, many investors have

ntified the overall upwards trend in food and agricultural

mmodities. Investing in both upstream and downstream

mpanies along the entire food supply chain can be a smart

y to profit from this global agflation trend.cording to major banks and agencies, this trend does not

pear to be slowing any time soon. With an estimated 2 billion

ra mouths to food, it is predicted that agricultural production

l need to increase by 70% over the next 40 years to meet

w demand. The effects of high food prices have been

ticularly severe in fast growing Middle East/North Africa

ions.

s formidable growth in demand provides opportunities for

estments across the spectrum from agribusiness, seed

hnology, equipment manufacturers and food buyers and

ers to agricultural softs and commodities investments.

hinese Corn Purchases to Reach 15yr Peak

U.S. Corn Supplies Dwindle to 15yr Low

na is on track to import 2.5MM tons of corn in the next crop

r, marking Chinas third major international corn purchase in

ee years and its highest import level in 15 years.

nese demand is picking up at a time when the United States,

worlds largest producer of corn, is dealing with critically

w supplies. U.S. corn inventories are predicted to reach a 15-

r low by the end of this August.

mand for corn as an animal feedstock has risen dramatically

Chinas expanding middle class consumes more meat. China

already the worlds largest importer of soybeans, another

portant source of animal feed. As a result, corn and soybean

ces have risen 52% and 34% respectively since the beginning

2010.

hina is going through a phase of incredible growth, says

becca Bratter of the Grains Council. Its not surprising that,

ring this period of transition, we may see some changes to

icultural supply-and-demand equations and some new tradews.

WATER NEWS

Middle East & North African Nations Top

Maplecroft Water Security Risk List

Extreme water security risks across the Middle East a

North Africa (MENA) may result in global oil prices increase

A new study says that political tensions in the region may

amplified based on water concerns.

The MENA region has some of the most fragile wa

supplies in the world, according to the Water Security RIndex and map from risk analysis and mapping fi

Maplecroft. Maplecroft rates 18 countries at extreme ri

with 15 located in the troubled MENA region, includ

Mauritania (1), Kuwait (2), Jordan (3), Egypt (4), Israel (

Niger (6), Iraq (7), Oman (8), United Arab Emirates (9), Sy

(10), Saudi Arabia (11), Libya (14), Djibouti (16), Tunisia (1

and Algeria (18).

The index and map has been developed to enable busine

and investors to identify the countries where water supp

will be limited or interrupted in the future. Maplecr

calculates water security by measuring countries wa

stress; population rates; reliance on external water suppli

sustainability of water use; intensity of water use in t

economy; government effectiveness; and virtual water u

which is a unique assessment of the water intensity

imported goods, such as food and oil.

Of the 12 Organization of the Petroleum Exporting Countr

(OPEC) members, six Algeria, Iraq, Kuwait, Libya, Sa

Arabia and the UAE, are in the highest risk category, whils

further two Iran and Qatar are rated high ris

Collectively, these countries produced approximately 30%global oil production in 2009, whilst the countries at extrem

and high risk collectively produced 45% of global oil in 2009

A lack of access to water can have a great number of dire

and indirect effects and the repercussions can reverbera

globally. Of particular importance to the global and lo

economy is the use of large quantities of water in t

production of oil. Lift water, which some companies sour

from aquifers, is used to force oil out of the well that wou

not rise under its own pressure from the geology. T

process is undertaken to prolong the economic lifespan

the well, and allow a greater volume of oil to be extractedsufficient water is not available productivity will decrea

and operations will be interrupted, which could significan

affect global oil supply and prices.

Technological innovations such as seawater desalination m

alleviate some risk and provide important sources of drinki

water. Desalination currently accounts for about 50%

Saudi Arabias drinking water. Of the remainder, 40%

drinking supplies come from ground water, 9% from surfa

water and 1% from waste water. Under a new infrastructu

development plan, Saudi Arabia planned to double

annual volume of desalinated water from 1.05bn m3

2.07m3 between 2010 and 2015.


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SOURCES

We regularly gather information from the following reputable sources, including but not limited to:

Bloomberg New Energy Finance RenewableEnergyWorld.com

Financial Times EnergyandCapital.com

Forbes.com: Energy News The Wall Street Journal

Green. The New York Times Streetwise Reports: The Energy Report

New Energy World Network Thomson Reuters

Scientific American REChargeNews.com

SustainableBusiness.com Climate Change Business Journal

U.S. Energy Information Administration (EIA) Commodity Futures Trading Commission

GLOBAL FUND EXCHANGE LTD.

ap: Non-renewable fossil aquifers in North Africa and the Middle East

U.N. Urges Hydro-Diplomacy in Light of

Mounting Global Water Security Concerns

As world water scarcity increases, the United Nations is concern

about possible diplomatic conflicts and tensions over shared wat

supplies. UN-Water, a group dedicated to all aspects of glo

freshwater and sanitation, is calling for new efforts in hyd

diplomacy.

Based on U.N. projections, the number of nations experienci

water scarcity defined as access to less than 1,000 cubic mete

of water a year will grow to 30 up from 19 in 1990.

Of those at-risk nations, 18 are located in the Middle East/Nor

Africa region. The supply and management of water resources is

wing political concern in the already volatile region. Increased hydro-diplomacy is needed to avoid or mitigate these wat

ated conflicts, says Dr. Zafar Adeel, chair of UN-Water. Dr. Adeel is calling for expanded efforts from the U.N. Security Coun

oster cooperation over shared water sources such as lakes and rivers.

e water crisis is a health crisis, its a farming crisis, its an economic crisis, its a climate crisis, and increasingly, its a politic

is, agreed U.S. Secretary of State Hillary Clinton. And therefore, we must have an equally comprehensive response.

honor of World Water Day 2011, U.S. Secretary of State Hillary Clinton and World Bank President Robert Zoellick signed eement to work together to assist developing nations with water security and water quality improvements. Under t

morandum of Understanding (MOU), a variety of U.S. agencies will contribute technology expertise and detailed data to he

erging nations monitor and better utilize their water resources and avoid water-related tensions and conflicts.
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Investing in the Future of Energy April 2011