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Filter Queen Defender Air filter top of the line

The business guide to green power: 12 ways to invest in renewable energy

Do you want those RECs bundled or unbundled? And will your PPA be physical or virtual? Have you even thought about the annual financial implications of the ITC?

For the uninitiated, the variety of ways companies can now throw their weight into the market for renewable energy quickly starts to devolve into alphabet soup.

Still, with more companies setting sustainability targets or eyeing falling wind and solar costs with heightened interest, replicable models for businesses to invest in renewable energy projects are increasingly in demand.

The key thing for businesses is to figure out what they want to get out of it.

But we’re not talking about just any green energy certificate of participation. More businesses are focusing on the concept of “additionality,” or making sure their money truly makes a dent in new renewable energy capacity — especially since the financial conditions for investment are also becoming more favorable.

“The landscape has changed a lot in the last two-to-four years,” John Powers, vice president of business development for clean energy broker Renewable Choice Energy, told GreenBiz. “In certain regions of the U.S., it is cheaper to lock in long term agreements with fixed rates that are significantly less than what power trades for in those same markets.”

As the American Council on Renewable Energy (ACORE) has illustrated, investment in clean energy takes on many different forms and has increased at variable rates over the last decade.

Clean energy advocates have attempted to seize on an investment climate made more appealing with the example of highly visible companies executing multimillion-dollar deals, such as Walmart, Ikea, Apple and Google.

Activist groups like Greenpeace, along with more business-friendly NGOs, such as the World Resources Institute, World Wildlife Fund and Rocky Mountain Institute, are all increasing their calls for action. The new Clean Power Plan and upcoming COP21 United Nations climate talks add to the urgency, with groups like CDP, We Mean Business and the RE100 signing businesses up for clean energy commitments.

Still, realizing that there may be an opening to invest in clean energy isn’t the same as hammering out a coherent strategy on renewables.

For one, renewable energy deals that are becoming more popular in some states are impossible to replicate elsewhere due to the way power markets are regulated. Challenges like sustainability budget constraints, limited manpower or unclear environmental  commitments can also come into play.

“The key thing for businesses is to figure out what they want to get out of it,” said Jennifer Martin, executive director of green power standard-setter the Center for Resource Solutions. “If you’re manufacturing consumer goods, you don’t want to have to develop a whole energy business.”

For those interested in the marketing and reputational benefits of buying clean energy, “green tags,” or credentials linked to carbon credits or offsets, could suffice. Those interested in reducing exposure to energy pricing volatility often commit to a long-term renewable energy procurement deal. Others are exploring the potential returns on clean energy equity investments.

“There’s definitely a growing sophistication among buyers of renewable energy,” Powers said. “To respond to that, we need a growing sophistication in product offerings.”

Green tags

Green tags, Renewable Energy Certificates, Renewable Energy Credits, Renewable Electricity Credits, it’s all the same concept: ensuring that a company gets credit for supporting renewable energy.

Martin, whose nonprofit Center for Resource Solution sets the standards for what qualifies as a REC through its Green-e program, said that RECs serve as a paper trail for clean energy.

“RECs are really the accounting mechanism for tracking who uses renewable energy at the end of the day,” she said. “No matter what kind of transaction you’re doing… the RECs need to flow from the generator to the end user.”

In some states, many of them concentrated in New England, energy utilities face high  Renewable Portfolio Standards (RPS) that increase pressure to obtain renewable energy credits. While the supply of RECs has constricted in markets like Massachusetts, with solar going for several hundred dollars per Megawatt hour (Mwh), states with either no standards or an excess supply of RECs have resulted in depressed prices.

No matter what kind of transaction you’re doing… the RECs need to flow from the generator to the end user.

The issue of additionality — that a project wouldn’t be built without investment from a certain company — arises when the price of RECs drop so low that it becomes difficult to determine whether purchasing the credits will actually add to renewable energy capacity. In addition to the wide regional variation in pricing, Martin said that the debate over additionality can sometimes miss the point.

“What businesses want to do is be able to tell a story about renewable energy,” she said. “What they’re trying to do is show that they made a difference.”

Similar logic often extends to carbon offset projects designed to compensate for emissions.

“The business case for either buying RECs or offsets is because you want to make an environmental impact, or make certain claims that are important to you, your shareholders or your customers,” Powers said.

1. RECs

Anyone that wants to claim that they are using green power, even in the case of a company that directly procures their own energy in the form of on-site systems like rooftop solar, will involve a REC to document who is using the renewable power.

The pricing for RECs, however, can vary from less than $1 per Mwh to hundreds of dollars due to the regional supply and demand equation dictated by portfolio standards and clean energy supply. The reason RECs can get so competitive in markers with high portfolio standards is the specter of a compliance payment if the targets aren’t met.

“They’re hugely variable by region,” Martin said. “One of the things that is going to change the calculus is the new Clean Power Plan. It could be very beneficial for the state to increase the amount of renewable energy.”

2. Unbundled RECs and REC swaps

One quirk of the REC system is that the credits can be traded. They are considered “unbundled” when the certificates are sold separately from the physical energy produced. For example, a company may want to buy energy from a remote solar farm, where the energy is sold to a third user or utility, with the company still claiming the RECs.

“Where unbundled RECs get criticism is in the argument around additionality,” Powers said. Since a REC is about the intrinsic value of producing energy in a clean way (with negligible or no carbon emissions), they may be sourced from a large, long-established wind farm, as opposed to being financially additional to a brand-new power producer.

To this end, Martin noted that one element of green power guidelines in flux is “the new date,” or how long renewable energy developments can be considered new enough to warrant credits. The current standard is 15 years, and the proportion of clean power required within a development has also been clarified over time.

3. Carbon offsets

On a fundamental level, carbon offsets are a way of paying for infrastructure projects that reduce net carbon emissions. They are useful since it is often impossible for a business to not produce any carbon, meaning that offsets are used to balance out greenhouse gas (GHG) impacts. 

There are a variety of offsets that can mitigate GHGs, from planting trees that sequester carbon to corporate energy efficiency programs or preventative measures that generate varying degrees of controversy, such as flaring leaching methane gas from unregulated landfills.

Power purchasing

Buying renewable energy to power a corporate office is nowhere near as easy as picking a provider and signing a contract.

In deregulated energy markets, customers can buy retail wind or solar and slap it right on the company real estate. Or, they can sign a long-term deal to buy the power generated by an off-site renewable energy plant.

In regulated utility markets, things can get complicated fast. Deals are more theoretical and often rooted in hedging energy prices. The outcome of providing capital to finance new renewable energy capacity is the same.

“The corporate buyer — Google, Walmart, etc. — they’re providing that structured and guaranteed revenue for a long period of time that allows a bank to say ‘Ok, I’ll loan you $200 million to build this thing,’” said Peter Mostow, an energy attorney with the law firm Wilson Sonsini Goodrich & Rosati.

The corporate buyer… they’re providing that structured and guaranteed revenue for a long period of time that allows a bank to say ‘Ok, I’ll loan you $200 million to build this thing.’

Still, the barriers to entry for various types of power purchasing remain high, feeding into interest in new forms of aggregated clean energy developments.

With all of these deal types, much bigger energy diplomacy concerns also come into play.

“This is really contentious territory,” Mostow said. “You’re striking right at the heart of the utilities’ business models.”

4. Physical PPAs

Say you’re a company that wants to buy electricity generated at an off-site wind or solar farm to power a given real estate asset. If you’re game for a 12-15 year commitment, a Power Purchase Agreement (PPA) could be your answer.

“A regular PPA, they never say it, but its sometimes called a ‘physical delivery PPA,"” Mostow explained. “Electricity is actually being generated at point A, moved across the wires, and delivered at Point B.”

(At least that’s the idea logically speaking. As Mostow notes, “In reality, the electrons that are generated at a solar plant never actually go to the customer. The grid is a big giant balancing or accounting system.”)

Regardless of where the electrons land, a company’s commitment to buy power for a term usually longer than a decade helps a renewable energy developer and potential lenders ensure that there will be a buyer for their power.

5. Virtual PPAs

Physical PPAs can work in California or other deregulated energy markets, but they can’t work in regulated markets with tight limitations on who is able to sell power.

As a workaround, companies, renewable energy developers and third party brokers have devised “virtual” or “synthetic” PPAs as a way to reap the financial and reputational benefits of PPAs — but without any power actually changing hands. While a company still powers its operations with grid-supplied electricity, both they and the developer benefit from a long-term fixed cost deal on energy generated from a project (which can be physically located anywhere).

Say the agreed-upon rate for a wind farm VPPA is $40 per megawatt. If the wholesale rate for energy generated by that project drops to $30 on a given day, the developer is buoyed by the extra $10 from the corporate buyer. But if grid prices spike and going rate for wind power jumps to $50, the scenario is reversed and the corporate buyer gets the extra $10.

“That $10 helps the corporate customer offset the utility bill that they’re paying at their data center of wherever,” Mostow said. “It’s a hedge for them, too.”

Powers adds that virtual PPAs also make sense strategically for businesses with a highly distributed power load, like a slew of retail stores, or if facilities are leased instead of owned.

6. Aggregated purchases

One obvious pitfall for PPAs is the high financial barrier to entry, with utility-scale renewable energy developments usually carrying a price tag well into nine figures. If that’s out of the question at any one company, what about pooling resources in an aggregated or syndicate-style deal?

“Think about it as getting people together and buying in bulk together,” Powers said.

While hammering out a deal with five equal parties is possible in theory, he notes that coordination can be difficult since, “This is a CFO-level decision at every company that’s making it.” Alternatively, having an “anchor” company — or one company willing to take on the bulk of the investment and then sell off smaller stakes as PPAs — could also work.

7. On-site power
While PPAs deal with utility-scale solar, corporate customers operating in deregulated markets also have the option of buying or leasing a renewable energy generation system (often solar) for on-site use. Adobe, Coca-Cola, Google, Kaiser Permanente and Kohl’s are among those pursuing these arrangements.

“On the on-site solar side, the commercial and industrial segment has been a bit under-served,” said Hervé Touati, managing director of RMI’s Business Renewables Center. “It has not seen the same growth as the utility segment or the residential segment. I think that will be corrected.”

Equity investment

As with most emerging markets, the evolution of clean energy has brought with it more variation in the financial maneuvers that companies and investors seek out to make money on a trend.

One of those avenues is equity investments — a tack taken by companies including Ikea and Google, Touati said — which vary in structure but share a common emphasis.

Energy is not a high margin business. It’s an infrastructure business.

“There are few companies that have done investments,” Touati said, which differs significantly from actually buying renewable power. “One is about making money off investments, and the other is about procuring green energy.”

Uncertain returns, however, can be a dealbreaker.

“The thing about energy as an investment is that energy is not a high margin business. It’s an infrastructure business,” Mostow said. “I’ve seen a lot of my corporate clients look at maybe we should just be equity investors. It doesn’t usually meet their hurdle for investment.”

8. Venture capital, private equity or stock purchases

More direct is the option for various investors or corporates with available capital to invest in privately-held clean energy companies (a $5 billion market as of 2014, according to ACORE), or to buy stock in those that have already gone public (an $18.7 billion segment last year).

At the project level, another option is to be a stock or equity investor in a solar or wind farm.

9. Tax incentives

One key variable in the case for renewable energy equity investment is the federal Investment Tax Credit currently offered to renewable energy project owners and investors. The catch: with the 2006-era policy set to expire in 2016, uncertainty about the future of this revenue mechanism is starting to loom larger.

10. YieldCos

In the lexicon of green energy, public entities created to own renewable power projects and deliver returns in the form of dividends — a class known as YieldCos — have started to come on strong in recent years with larger renewable energy companies like SunEdison. The new packaging of clean energy investments isn’t coming without growing pains, however, and has in some ways lumped renewables into broader volatility.

“Investors have stepped up to finance a host of energy-related products in recent years, contributing to a glut in supply that has spurred a dramatic collapse in commodities prices,” Bloomberg recently reported. “That’s helping to fuel additional market scrutiny of commodities’ players — from giants such as Glencore to U.S. shale explorers and even solar panel operators.”

11. Green bonds

On the lower-risk end of the spectrum, green bonds — or government bonds tied to projects designed to combat climate change — are an area that clean energy advocates have been hopefully watching for years.

Often pitched as a way for smaller investors to contribute to daunting infrastructure financing, the market is expected now exceeds $60 billion. Up next: settling on what really counts as green infrastructure and testing investors’ appetites for continuing to grow the market.

12. Securities, mutual funds and beyond

While equity investments are more universally understood financial arrangements, more esoteric mechanisms associated with Wall Street are also making their way into the market for clean energy.

Goldman Sachs claims credit for the first rated “securitization” of solar energy, or converting an illiquid asset into a security, for a Japanese bond project. Investing in mutual funds that include an increasingly broad array of renewable energy options is another option.

The business guide to green power: 12 ways to invest in renewable energy

Incentives for Renewable Energy Investment in ASEAN

In this article ASEAN Briefing will look at the tax and other incentives provided to companies seeking to invest in renewable energy in Singapore, as well as examine those of other countries within ASEAN. Following our previous article on the solar energy market in ASEAN, we will place an emphasis on the incentives on this industry in the countries covered.

Singapore, more than any other country in the ASEAN region depends on the import of fossil fuels for its energy needs. The smaller size of the city-state also means the country has less room available to install renewable technologies, and cannot build large solar farms like Thailand or hydropower projects as Vietnam has. Recognizing these limitations Singapore has created incentives for R&D in renewable energies that make use of the conditions specific to the country.

The increasing energy demands in Singapore and across the region have meant that renewable energy has come to be seen not only as an alternative energy source, but also as a potential area of key economic growth. Singapore for example has set the target of creating 18,000 jobs and generating S $3.4 billion (US $2.4 billion) through renewable energy by the end of this year.

Research and Development Incentives in Singapore

In order to encourage investment in energy, water and green building solutions, Singapore has invested more than S $800 million (US $570 million) since 2011. These incentives include solar energy solutions, as well as providing a wide array of incentives across most of the renewable energy sector. These have been aimed both at companies and individual citizens in an effort to make Singapore a more sustainable city. 

Singapore is seeking to take advantage of its strategic location to both harvest solar power and attract investment to the region. The country is betting on its location in the tropics, exposing it to solar rays 50 percent stronger than those received by the solar powerhouses of Germany and Japan. Additionally, it is well-connected to ASEAN in terms of physical and economic infrastructure, which could attract companies seeking to provide electricity to the millions in the region that still lack the service. The city-state has become a major hub for companies such as Phoenix Solar and Yingli, both of which have investments in other countries in the region such as Malaysia.

The government has developed a solar PV leasing plan, under which residents and small businesses can lease solar panels from solar companies and only use the energy that they need. This allows for solar energy generation in a country that does not have extensive land resources to set up large solar farms. During the leasing period solar companies still own, install, and maintain the solar panels. However, unlike some other governments in the region, Singapore does not provide a feed-in tariff through which producers can sell the power they produce.

Besides the multiple government initiatives that have attracted many companies in the R&D sector, the country currently provides 35 government funding and incentive programs. One example of these programs is the Grant for Energy Efficient Technologies (GREET) that provides up to 20 percent in funding for registered companies that invest in energy efficient equipment in new or existing facilities. Another initiative is the Design for Efficiency Scheme (DfE) which aims to encourage businesses to build new facilities or expansions to adopt green technologies into their facilities. Companies can qualify for a subsidy that covers up to 50 percent of the costs or up to S $600,000 (US $428,000).

 RELATED: Pre-Investment Services from Dezan Shira & Associates

Incentives in Other ASEAN Markets

Thailand

Thailand’s reliance on imported fossil fuels, second only to Singapore in the region, meant that in 2012 imports accounted for 55 percent of overall commercial demand for energy in the country. Recognizing the increasing demand, the government developed the Alternative Energy Development Plan in 2012 with the goal to produce 25% of its energy from renewable sources by 2021. In order to achieve this goal Thailand offers both tax-based and non-tax-based incentives for companies investing in renewable energy.  

Incentives offered include the reduction or elimination of import duties on machinery and raw materials, reduction of corporate income taxes, permission to bring foreign workers, own land and remit foreign currency abroad. Thailand also has set in place a rooftop solar feed-in tariff program (FIT), under which energy produced by through energy sources is purchased by the government and reimbursed at price dependent on the cost of the energy generation technology. Additionally, government support is provided through multiple agencies such as the Energy Policy and Planning Office and the Department of Alternative Energy Development, both of them under the auspices of the Ministry of Energy.

The Philippines

The Philippines, much like Thailand and Singapore, is dependent on imports of oil, natural gas and coal to serve its energy needs. However, the country also faces an increasing energy demand among its growing population, which often leads to power outages during the summer months. In response, it has taken multiple initiatives such as the National Renewal Energy Program which entered into effect in 2011 and calls for renewable energy production to increase from 5438MW to 15,304MW by 2030.

To achieve this goal the government has developed a feed-in tariff (FIT) program that pays companies for energy generated through non-conventional measures. FIT rates are guaranteed at a fixed rate for 20 years and help ensure that investors see a return in their investment. Additionally, renewable energy developers enjoy a seven year tax holiday, at the end of which they pay only 10 percent of income tax; as well as being able to import technologies from abroad duty-free for ten years.

Vietnam

Vietnam like many of its neighbors has seen increasing energy demands among its growing population, which has put strains on its energy grid and forced the country to invest in hydropower, wind and solar energy. Among the incentives offered to companies is accelerated depreciation in power generation, import duty exemption for clean technology products, an incentive tax rate of 10 percent for 15 years, and tax reduction of 50 percent with tax exemption for four years for new projects, among many others.

Further incentives include subsidies by the Environmental Protection Fund, which covers the difference between the real inputs costs and the selling price of the power generated.  Additionally, Vietnam also offers feed-in tariff incentives – however these are offered in the wind energy sector as opposed to the solar sector, which has helped the wind sector account for 78 percent of all clean energy investor between 2006 and 2013.

RELATED: Renewable Energy and Investment in ASEAN

Malaysia

Malaysia presents an interesting case in the region; while it is the third largest producer of solar panels in the world it has been slow to implement the technology when it comes to solar farms. In an effort to promote investment in the domestic PV market the government launched the Malaysia Building Integrated Photovoltaic Project (MBIPV) to provide financial incentives. Since 2011, Malaysia like many other countries in the region has been providing feed-in tariffs for solar energy producers, but also has extended these tariffs to other renewable energies. 

In order to benefit from the Feed-in Tariff developers need to be approved by the Sustainable Energy Development Authority and conclude a Renewable Energy Power Purchase Agreement. Under this tariff companies investing in PV panels or mini hydro power projects qualify for and FIT tariff for 21 years. Companies in the biomass or biogas industry can take advantage of the tariff for 16 years. Additionally, this past May it was announced that investments in geothermal energy that generate up to 30MW would also be eligible for the feed-in tariff.

Further Support from Dezan Shira & Associates

To learn more about investment opportunities in ASEAN’s renewables industry, or country specific comparisons on incentives for green power generation, please get in touch with the specialists at Dezan Shira & Associates for further consultation.

About Us Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email asean@dezshira.com or visit www.dezshira.com. Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight. ‍

The 2015 Asia Tax Comparator
In this issue, we compare and contrast the most relevant tax laws applicable for businesses with a presence in Asia. We analyze the different tax rates of 13 jurisdictions in the region, including India, China, Hong Kong, and the 10 member states of ASEAN. We also take a look at some of the most important compliance issues that businesses should be aware of, and conclude by discussing some of the most important tax and finance concerns companies will face when entering Asia.

Tax, Accounting, and Audit in Vietnam 2014-2015
The first edition of Tax, Accounting, and Audit in Vietnam, published in 2014, offers a comprehensive overview of the major taxes foreign investors are likely to encounter when establishing or operating a business in Vietnam, as well as other tax-relevant obligations. This concise, detailed, yet pragmatic guide is ideal for CFOs, compliance officers and heads of accounting who need to be able to navigate the complex tax and accounting landscape in Vietnam in order to effectively manage and strategically plan their Vietnam operations.

An Introduction to Tax Treaties Throughout Asia
In this issue of Asia Briefing Magazine, we take a look at the various types of trade and tax treaties that exist between Asian nations. These include bilateral investment treaties, double tax treaties and free trade agreements – all of which directly affect businesses operating in Asia.

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Incentives for Renewable Energy Investment in ASEAN

Get car ready for winter now

Well-maintained vehicles deliver stronger and more efficient performance. Proper maintenance also helps avoid breakdowns and costly repairs, which can save you money. And when it comes time to replace your vehicle, a documented maintenance history will contribute to a higher resale value.

Last winter AAA’s Roadside Rescue Team came to the aid of nearly 35,000 stranded drivers. Almost 9,000 calls came from drivers with dead batteries, and more than 3,800 calls were for tire problems.

Now is the time to have your vehicle inspected to prevent breakdowns during the cold winter months that lay ahead.

How do you know when your vehicle needs routine service? With older vehicles, motorists had to study the owner’s manual or maintenance booklet and decide if they drove in “normal” or “severe” conditions. Then, they consulted a time/mileage chart that indicated when the car should be taken to the shop – and hopefully they remembered to do so. Most cars today are equipped with computerized maintenance reminder systems that remove much of the hassle from car care.

Confusion still reigns

Based on 2012 Car Care Council vehicle inspections, 77 percent of vehicles had overlooked maintenance items — the majority of which involved low or dirty engine oil. But many also had other service needs that are not routinely prompted by in-vehicle maintenance reminders, things such as low engine coolant, dirty air filters or burned-out headlamps.

Oil changes are another point of confusion. Suggested intervals for oil changes today can vary widely. AAA Tire & Auto manager Jason Brown recommends drivers take a cautious approach when it comes to scheduling oil changes. Brown said “The on board computers only monitor driving habits. They have no ability to monitor oil conditions. The oil itself is usually OK for the longer intervals, yet the oil filter can only filter so much dirt. After it becomes full of dirt it stops filtering and continues to flow the debris throughout the engine, which can result in serious damage. An oil change is the one of least expensive routine maintenance procedures you can do on your vehicle, and it has the greatest impact on the longevity of your engines life span.”

What’s right for your vehicle?

Whether you personally perform vehicle maintenance or rely on a trusted technician, the key is to follow the schedule set by the vehicle manufacturer. If your car has a reminder system, trust it to schedule your oil changes, but also be sure to review your owner’s manual or maintenance booklet to learn what other services are due at the same time.

Never ignore a maintenance reminder. Doing so will increase engine wear and potentially cause long-term damage.

It’s time to prepare your vehicle for the winter ahead

The new AAA Tire & Auto Center located at 8381 Old Troy Pike in Huber Heights offers customers a free air station so motorists can make sure their tires are properly inflated. Drivers can also get free bumper-to-bumper preventative maintenance inspections to help prepare for the upcoming winter. For more information, call (937) 281-3530.

Every month in Life, Cindy Antrican, public affairs manager for AAA Allied Group, Inc., provides traffic safety tips and information for motorists. Email: CAntrican@aaa-alliedgroup.com.

Get car ready for winter now

Renewable Energy and Soft Commodities

Lately, the commodities market has been a graveyard for investors, with prices at multiyear lows and no sign of any positive catalysts to turn things around. The global economic slowdown has affected goods such as steel, aluminum, copper and other commodities, and the lower demand from China is only serving to keep materials prices low for an extended period of time.

The 15-year commodity super cycle culminated in a burst bubble around 2008, and has experienced a trend of depressed prices and falling demand since then. With China’s market implosion, commodities took another hit as demand fell off a cliff, with the expectation being that many commodities won’t recover for years as the world adjusts to a new paradigm without heavy Chinese demand.

If we look back at the commodities cycle from 2002 to 2012, we see a high correlation between the cycle and falling demand in the Chinese markets. During that decade, China experienced high average yearly GDP growth of 10.6% and became the world’s leader of commodity imports, which helped drive up prices and boost production.

If we look at the overall performance of commodities lately by tracking the S&P GSCI Commodity Index (GTX), we see how China’s decline largely is responsible for the collapse in the commodities market.

Of course, not all commodities behave similarly. Oil, steel, copper, gold and silver generally are the representatives of all commodities; the “soft” commodities such as grain, corn, coffee and soybeans often are overlooked. China’s slowdown might have a lingering impact on hard commodities used for industrial purposes, but agriculture isn’t as highly correlated with China.

What’s Keeping “Soft” Commodities Down

Agricultural commodities also have fallen victim to the collapse of the commodity super cycle, plagued by the fall in oil prices and less demand for goods and services. Considering that the global population is constantly growing and there’s only a limited amount of arable land available for crop production, at first glance, it might not make sense that this industry is experiencing hard times.

Unlike oil, which fluctuates both on demand and supply, it is largely supply that affects agricultural commodities. Demand for food products is relatively steady as the amount of arable land is fixed and a steadily growing global population will demand food products, regardless of economic direction.

Right now, it’s a supply glut that’s primarily keeping soft commodities weak. A recent U.S. Department of Agriculture report indicated higher-than-expected harvests in the corn, wheat and soybean markets, sending prices plummeting lower.

Record-high soybean and corn harvests surprised analysts and created a supply glut that likely will impact agricultural futures for the next quarter or two. The World Agricultural Supply and Demand Estimates Report shows a drop in production for a wide variety of soft commodities such as corn and wheat, with less use as residual use and livestock feed. A higher dollar also means these goods face stiffer competition overseas, which is hurting U.S. exports.

The lowered expectations could be a contrarian signal for investors, though. At current prices, there isn’t much more downside risk in agricultural commodities, while there’s plenty of room for upside surprises. Crops largely are dependent upon weather conditions, which easily could alter the long-term outlook, although it’s a risk that can’t be relied on as a basis for investment.

Instead, the impact of a bumper crop, a crop which yields unusually high production, has already been priced into final yields. With high expectations of further oversupply issues, any type of downward figure revision would have a positive impact on soft commodity prices.

Link to Renewables

Agricultural commodities have had a relationship with renewable-energy companies for the past decade or so. Oil has been the primary influence in regard to food costs as a critical component in farming usage such as fertilizers and transportation of crop goods.

The demand for biofuels adds another element to the cost equation as well as contributes to supply and demand expectations of corn, wheat and other soft commodities. The heavy push toward sustainability both in increasing crop yields for food and energy consumption as well as increased investment in green energy could be the key to recovery in this sector.

While oil prices are likely to remain low for the foreseeable future, the green energy sector hasn’t slowed down at all. According to Bloomberg New Energy Finance, global investment from developed countries in green energy topped $278 billion in 2014 compared to $178 billion in 2009. The drop in oil also helped free up capital for green energy investments as well as attract a more skilled labor force to the industry. As competition increases, green energy will continue to influence overall global energy costs, helping to keep them stable and bring wholesale costs down.

The Bottom Line

Green energy might be the key to lifting prices in soft commodities. As oil becomes less influential on global energy demand and commodity values, alternative energy will take its place more and more over the coming years.

While agricultural commodities have been kept low by falling global demand and oversupply issues, a healthy green industry might be the catalyst that helps turn the commodity super cycle back around.

Image courtesy of Suat Eman at FreeDigitalPhotos.net

Renewable Energy and Soft Commodities

Dyson AM11 Pure Cool multiplies its pure coolness

For years now Dyson has been the go-to company for impressively engineered (some would say over-engineered) air-moving devices. We all know of Dyson’s vacuums, Airblade hand dryers, and fans, but their fan family is more extensive than you might think. Fans became heaters and, as of September 1, they evolved into air purifiers.

The Dyson AM11 Pure Cool air purifier is a tower fan (it’s 40 inches tall and meant to be placed on the floor) with a “360° Glass” HEPA filter that’s rated to last for six months of nonstop use. Tower fans are nothing new and Dyson does extensive air filtering with its vacuum line, so an air purifier — which is little more than a filtered fan — made perfect sense. For its part, Dyson would stress that adding in a filter is not enough to make an effective product. Poor design and construction means air leaks where tiny allergens (in the 0.5 micron range) can escape making any number of today’s air filters less than fully effective.

This puts us in the normal Dyson-decision-making mode: we know its a good product, but at $400 (list price) it’s not just expensive, its considerably more expensive than options we know to be great and two-to-three times more expensive than good products from reliable companies. As for me, I’ve used a Homedics AF-100 air purifier for years. I’d put it in the “better than nothing” category, which is to say that it has a street price of about a fifth of the Dyson and it seems to be sufficient for my needs. All that said, air purifiers that are designed for big rooms and serious filtration can get very expensive.

At first glance, the AM11 is a Dyson “bladeless fan” with a new filter base. It looks a whole lot like the AM07 tower fan and the functionality is similar — it turns on and off, it oscillates, it runs at power levels from one through 10, and it can operate on a sleeper. The Pure Cool filter cannot be disabled or bypassed, but it can be removed and replaced. It’s fine enough that it will filter out everything from bacteria to pollen to cooking smells. The key here is not just that it’s a good filter, but also that it’s sealed properly in the housing, which means the air being pushed through the fan went through the filter, not around it through a poorly fitted panel or leaky seal.

In addition to offering Dyson-level build quality, the Pure Cool addresses another serious problem with air purifiers: they are ugly as sin. Most are beige plastic boxes that are embarrassing to have in any prominent place in your home. And hiding them away defeats the purpose of having an air purifier, because they need to be where the people are. The oscillation and power of the Dyson mean that it fits in a number of settings, and can sit in a corner and cool most areas. The fan does not tilt, but its height gives it enough vertical coverage for most situations when the fan function is as important as the air purification.

One interesting complication with the Dyson bladeless system is that much of the air that is being moved never goes through the base or, for that matter, the filter. Here is Dyson’s own explanation of the fan’s use of Bernoulli’s principle in its “air multiplication”:

So, the majority of the air being moved by any Dyson fan, including this purifier, is not going through the base, so its never purified. This makes the Pure Cool seem like a product where Dyson’s bladeless technology might not be ideal.

The Pure Cool was first released in China and Japan, and, like most air purifiers, is primarily aimed at markets where air pollution is a serious issue. This extends to the capturing of pollen, germs, and particulate, making it something with wider appeal but it’ll probably never be a big seller in the US or Europe.

Test results

One thing I’m not going to do in this review is pretend to do any scientific testing of the air purifier’s filtration. If you want more on that I’d highly recommend SweetHome’s excellent dive into the science behind air purification. That article didn’t test the Pure Cool and ended up recommending a device that cost $250 — not cheap, but a far cry from the Dyson. The only other thing I’ll note on this front is the HEPA is a DOE standard so there is quality assurance to the filters used by any company whose product uses that label. It doesn’t ensure that the fan quality will be good enough to take advantage of the filter, but at least you know you are starting from a strong foundation.

At its very essence, what does a filter do? It takes stuff out of the air and holds onto it. After 25 days of 24/7 usage on setting four (out of 10) my AM11’s filter picked up less than a tenth of a gram of particulate. I’d say that’s because I live in an immaculately clean apartment, but that’s not the case. And even if I did, the Dyson is less than 10 feet from a window, but was open for at least 5% of the testing time.

I’m not fully sure what the takeaway from this is, but we do have to remember that when it comes to airborne particulate, a gram would be a lot. So you might never see additional weight if the filter was only picking up bacteria, but between things like dust and dander, I would have expect to see some movement, especially considering that this time period used up about 14% of the filter’s life.

What I really wanted to do was to find some way to prove the Dyson was doing its job. Once again, I’d point you at the SweetHome article or this video of the AM11 clearing the smoke from 10 cigarettes out of the air:

Next was testing for noise production and air speed:

For a bit of context you can check out the results from our testing of the best desktop fans (please note, that testing was done at a different time so it’s not apples to apples data). Long story short, the Dyson Pure Cool moves a reasonable amount of air, but it’s not a very powerful fan.

As for the noise levels, I used an iPhone 6 with a noise monitor app, not any fancy test equipment. As a result, the numbers are inflated, but you can get an understanding of the trade off between moving more air and generating more sound. At its lowest three levels the Dyson is basically silent. At its loudest, the fan is more than you’d want to listen to in a typical living room but it’s not obnoxious — it’s along the lines of having a dishwasher or washing machine running nearby.

The final test was for power usage, which will help determine operating cost.

The power consumption of the fan is relatively modest. If you were to run the AM11 at setting level five with oscillation nonstop for a year, your electricity cost would be $13.20 (at 15 cents per kWh).

Dyson Pure Cool conclusions

The price is the major drawback of the Pure Cool, but that’s pretty obvious from the start. There are some other downsides, but they are much easier to cope with. The filter can’t be rinsed, rather it must be replaced. Replacements don’t appear to be available for sale yet, but Dyson has said to expect them to be $70. At $140 for a full year of nonstop use (there is no mention of fan speed, but I’d assume this is at 50% speed), a more typical eight-hour-a-day user will have filter cost of about $47 a year. Not cheap, but more or less in line with the competition.  Another downside is the lack of a filter bypass. If you are using the Pure Cool as a fan and you have the window open or have it placed on a porch, you might want to use it without the filter so that you can minimize debris build up and maximum filter life.

The Pure Cool AM11 is a totally sensible addition to the Dyson lineup. It combines the company’s expertise in air moving with its extensive usage of air filtration and throws everything in a fan that was basically already designed. From the standpoint of the general consumer the AM11 makes sense in that it will replace the AM07 tower fan — now for about the same money you can get a beautifully designed fan with a filter, why not do it? As for a purchase of someone with a real need for an air purifier, it’s not clear if the Dyson is a great choice. The air multiplier design inherently means that more unfiltered air is being moved than filtered air.

Dyson AM11 Pure Cool multiplies its pure coolness

Surprising study finds that solar energy can also cause climate change (a little)

In this photograph taken on August 23, 2015, a general view shows construction taking place at Roha Dyechem solar plant at Bhadla some 225 kms north of Jodhpur in the western Indian state of Rajasthan. MONEY SHARMA/AFP/Getty Images

Large solar arrays could have some surprising side effects, according to a new study, including causing changes in the local climate.

On a global scale, these changes will be minor compared to what would happen if humans continue to burn fossil fuel for energy instead, but are still worth watching, scientists say.

Figuring out how renewable energy sources will affect their local landscapes is an increasingly relevant challenge for scientists, as more and more nations are vowing to slash their carbon outputs and switch to alternatives, such as solar and wind energy. Previous studies have shown that both solar arrays and wind farms have the potential to cause regional changes in temperature and precipitation by altering the amount of solar radiation absorbed by the Earth or disrupting local airflow patterns.

With this in mind, Aixue Hu, a climate change research scientist at the National Center for Atmospheric Research, conducted a study, published Monday in Nature Climate Change, that attempted to predict the climatic effects of solar arrays. 

For their experiments, Hu and his colleagues assumed a low-carbon scenario, in which global greenhouse gas emissions would start to decline after the year 2020 as renewable energy sources are more widely used.

The researchers then carried out a series of simulations. The first simulation included solar panel installations across the world’s deserts — the parts of the world likely to receive the most sunlight — and throughout all the world’s urban areas.

The second simulation mimicked that scenario, but also assumed that the world would continue to consume a lot of energy through the use of air conditioning. 

The final simulation dropped the thermostat assumption and scaled back the number of solar panel arrays. This scenario is the “more realistic” of the bunch, according to Hu, and was meant to test whether a more modest solar panel installation would be able to address the global energy demand through the end of the century.

After running the simulations, the researchers found that the solar power generated in each of the experiments would be enough to satisfy global electricity demand by 2100. That was the good news. But the experiments also showed that the panels do have an impact on climate, at least regionally.

Solar panels change the way sunlight is reflected and absorbed by the Earth. Any radiation they take in is radiation that’s not being absorbed by the Earth. This leads to a cooling effect in the region surrounding the array. In fact, the first two simulations in this study, which assumed solar panel installations throughout the world’s desert and urban areas, produced a 2-degree Celsius regional cooling in the desert regions. This cooling was also associated with a 20 percent decrease in precipitation in the deserts. Other, slightly broader changes in precipitation and wind patterns occurred as a result in the regions surrounding the deserts.

In urban areas, the effects were a little different. In the first simulation, the model predicted a very small amount of cooling, with temperature falling approximately 0.26 degrees Celsius. In the second simulation, the one in which global thermostat regulation is significantly increased, the large amount of power consumed actually produced an urban heat island effect, in which human energy use releases heat into the environment and causes the regional temperature to warm up. In this scenario, the warming from the heat island effect essentially compensated for the cooling caused by the solar panels.

When considered on a global scale, these effects become much smaller. In the first simulation, the average change in global temperature is an average decline of about 0.34 degrees Celsius, relative to the temperature that would be expected under the same low-carbon climate scenario with no solar parks. In the second simulation, where the heat island effect is taken into account, there would be an average increase in global temperature of about 0.09 degrees Celsius. 

However, the authors acknowledge that it’s unrealistic to assume such widespread solar panel installations in the future. So they looked to the third simulation for a more realistic view of what’s to come.

In the third simulation, which included fewer solar panel arrays, the climate effects are scaled down accordingly. The average global cooling observed in this simulation is only a decline of about 0.04 degree Celsius. 

The study shows that, while large solar arrays can cause some significant regional changes in climate, “globally it will not affect the global climate much,” said Hu. “This is a big contrast with the fossil fuels.” According to most climate projections, human-caused global warming — the result of releasing greenhouse gases into the atmosphere — could lead to anywhere from 1 to nearly 3 degrees of global temperature increases under even moderate climate scenarios.

That said, the study does also provide some insight into how the local solar panel-induced climate effects might be minimized. The results suggested that local climate effects were smaller in urban areas than in the more remote desert areas and can be mitigated by the urban heat island effect. So while it’s tempting to place large solar arrays in desert areas, where they’re most likely to receive the greatest amount of interrupted sunlight, the authors note that “a more distributed solar panel installation could reduce the impact of the solar panels on regional and global climate.”

And being aware of the way certain regions could be affected by large solar deployments, could help policymakers make decisions about how to distribute panels in these places and how to prepare for the local changes that could occur as a result, Hu said.  

So future research may also examine how the distribution of solar arrays could be changed in order to maximize their positive effects on land use and minimize their negative ones.

In the meantime, this study reinforces the idea that a transition to renewable energy is imperative to protecting Earth’s climate future. While the transition won’t be without its own effects, the authors note that the alternative — a world in which fossil fuel burning is allowed to continue unabated — would be far worse.

Surprising study finds that solar energy can also cause climate change (a little)