Wednesday, January 24, 2007


In his State of the Union Address, President Bush outlined his policy initiatives on energy. Briefly:
-Reduction in gas usage/increase in fuel economy.
-Increase in strategic oil reserves.
-Increase in domestic oil production.
-Increase in renewable and alternative fuels.
Time frames although expressed, will be massaged by politics and popular/consumer opinion.

After many years of rhetoric and the formation of altruistic goals, can we proceed substantially in reducing our dependence on foreign oil? If so, what trends will the market embrace?

1. Solar and wind energy, in a viable quantity, require huge installations. Efforts to grow this area will be hindered by environmentalists and the not in my backyard mentality.
2. Biodiesel is in its infancy and has sprouted up as a cottage industry. Many concerns have been expressed about its cost and suitability with current diesel engines.
3. Ethanol is costly to produce and must pass on the cost to the consumer. It competes with a food source for humans and livestock. Current corn prices have provided an incentive to store corn as a hedge giving rise to artificial shortages. Other cellulosic sources such as wood pulp, weeds, and grasses need many more years of technological advances to become viable.
4. Fuel economy is an area we can make huge strides in quickly. Fuel cells put but a tiny dent in the overall picture. We need manufacturers to redefine their mission statement to include economy and drivers to drive less.
5. Coal provides 40% of our electric distribution. We have as much coal as Saudi Arabia has oil. Clean coal technology as well as Coal to Liquid processes are nearing viability.
6. Domestic oil production has stepped up the pace and we will feel the online relief in the near term.

The market will tend to treat such companies as Evergreen Solar (ESLR), Suntech Power (STP), Pacific Ethanol (PEIX), VeraSun (VSE), Aventine (AVN), and not to mention the fuel cell companies, as risky. If one is inclined to invest in this area, a better choice may be PowerShares Wilderhill Clean Energy ETF (PBW). These stocks will rise and fall on rhetoric. Large corporations such as General Electric(GE) or Archer Daniels Midland (ADM) are steady growers with a stake in alternative energy, but little will be added to the bottom line.

The better trend to bet on is coal and domestic oil. Peabody Energy (BTU) and Headwaters (HW) in the coal sector. Most large integrated oil produces and oil service companies in the oil and gas sector. A good play on oil services is the Oil Services ETF (OIH).

The more things change, the more they stay the same. We will lessen our dependence on foreign oil, although at a slower pace than hoped, with a viable alternative. That alternative is our domestic coal and oil.

1 comment:

Jay Draiman said...


In order to insure energy and economic independence as well as better economic growth without being blackmailed by foreign countries, our country, the United States of America’s Utilization of Energy sources must change.
"Energy drives our entire economy." We must protect it. "Let's face it, without energy the whole economy and economic society we have set up would come to a halt. So you want to have control over such an important resource that you need for your society and your economy." The American way of life is not negotiable.
Our continued dependence on fossil fuels could and will lead to catastrophic consequences.

The federal, state and local government should implement a mandatory renewable energy installation program for residential and commercial property on new construction and remodeling projects with the use of energy efficient material, mechanical systems, appliances, lighting, etc. The source of energy must by renewable energy such as Solar-Photovoltaic, Geothermal, Wind, Biofuels, etc. including utilizing water from lakes, rivers and oceans to circulate in cooling towers to produce air conditioning and the utilization of proper landscaping to reduce energy consumption. (Sales tax on renewable energy products should be reduced or eliminated)

The implementation of mandatory renewable energy could be done on a gradual scale over the next 10 years. At the end of the 10 year period all construction and energy use in the structures throughout the United States must be 100% powered by renewable energy. (This can be done by amending building code)

In addition, the governments must impose laws, rules and regulations whereby the utility companies must comply with a fair “NET METERING” (the buying of excess generation from the consumer at market price), including the promotion of research and production of “renewable energy technology” with various long term incentives and grants. The various foundations in existence should be used to contribute to this cause.

A mandatory time table should also be established for the automobile industry to gradually produce an automobile powered by renewable energy. The American automobile industry is surely capable of accomplishing this task. As an inducement to buy hybrid automobiles (sales tax should be reduced or eliminated on American manufactured automobiles).

This is a way to expedite our energy independence and economic growth. (This will also create a substantial amount of new jobs). It will take maximum effort and a relentless pursuit of the private, commercial and industrial government sectors commitment to renewable energy – energy generation (wind, solar, hydro, biofuels, geothermal, energy storage (fuel cells, advance batteries), energy infrastructure (management, transmission) and energy efficiency (lighting, sensors, automation, conservation) (rainwater harvesting, water conservation) (energy and natural resources conservation) in order to achieve our energy independence.

"To succeed, you have to believe in something with such a passion that it becomes a reality."

Jay Draiman, Energy Consultant
Northridge, CA. 91325
Jan. 25, 2007

P.S. I have a very deep belief in America's capabilities. Within the next 10 years we can accomplish our energy independence, if we as a nation truly set our goals to accomplish this.
I happen to believe that we can do it. In another crisis--the one in 1942--President Franklin D. Roosevelt said this country would build 60,000 [50,000] military aircraft. By 1943, production in that program had reached 125,000 aircraft annually. They did it then. We can do it now.
The American people resilience and determination to retain the way of life is unconquerable and we as a nation will succeed in this endeavor of Energy Independence.

Solar energy is the source of all energy on the earth (excepting volcanic geothermal). Wind, wave and fossil fuels all get their energy from the sun. Fossil fuels are only a battery which will eventually run out. The sooner we can exploit all forms of Solar energy (cost effectively or not against dubiously cheap FFs) the better off we will all be. If the battery runs out first, the survivors will all be living like in the 18th century again.

Every new home built should come with a solar package. A 1.5 kW per bedroom is a good rule of thumb. The formula 1.5 X's 5 hrs per day X's 30 days will produce about 225 kWh per bedroom monthly. This peak production period will offset 17 to 24 cents per kWh with a potential of $160 per month or about $60,000 over the 30-year mortgage period for a three-bedroom home. It is economically feasible at the current energy price and the interest portion of the loan is deductible. Why not?

Title 24 has been mandated forcing developers to build energy efficient homes. Their bull-headedness put them in that position and now they see that Title 24 works with little added cost. Solar should also be mandated and if the developer designs a home that solar is impossible to do then they should pay an equivalent mitigation fee allowing others to put solar on in place of their negligence. (Installation should be paid “performance based”)

Installation of renewable energy and its performance should be paid to the installer and manufacturer based on "performance based" (that means they are held accountable for the performance of the product - that includes the automobile industry). This will gain the trust and confidence of the end-user to proceed with such a project; it will also prove to the public that it is a viable avenue of energy conservation.

Installing renewable energy system on your home or business increases the value of the property and provides a marketing advantage.

Nations of the world should unite and join together in a cohesive effort to develop and implement MANDATORY RENEWABLE ENERGY for the sake of humankind and future generations.

Jay Draiman
Northridge, CA 91325