Sound investments to decarbonize the world’s industries

As cutting-edge technology vaults the global economy into the Fourth Industrial Revolution, the processes we use to turn raw materials into everyday products are still astoundingly reliant on the same dirty-burning fossil fuels that our grandparents used a century ago.

Manufacturing still relies on extracting millions of tons of raw material from the ground every day and refining it into cement, steel, polymer and countless other finished products by burning carbon fuel to super-high temperatures and emitting tons of planet-warming greenhouse gases (GHG). According to a recent IEA Tracking Industry report, direct industrial GHG emissions rose to 24 percent of global emissions, and unless something is done to decarbonize, there will be no chance of addressing the climate change challenge.

So, what can financial institutions do? IFC, for one, is sensitive to the critical role that manufacturers play in improving living standards, providing jobs and bolstering economic growth around the world and has developed a comprehensive strategy that addresses every link of the value chain, encouraging countries to produce a greater diversity of products using more sustainable processes.

The strategy emphasizes low-carbon growth through the selection of the best available technology and the use of cleaner fuels and renewable power. It encourages manufacturers to reduce their use of natural resources by applying circular economy principles, as well as by conducting a systematic greening of their supply chains and selectively substituting imports to reduce transport-related emissions.

The World Bank Group, including IFC, has established a major new set of climate targets (PDF) for 2021-2025, doubling its current five-year investments to around $200 billion in support for countries to take ambitious climate action.

Innovative solutions

To further encourage such investments, IFC set an internal price on carbon at $40–80/metric ton of carbon dioxide equivalent in 2020, rising to $50–100 in 2030 and continuing in a similar trajectory beyond. Making extensive use of financial and advisory support services to help investee companies recognize the reputational value of sustainability and good global citizenship, IFC also uses innovative tools such as green bonds, green loans and blended finance to marshal decarbonization investments.

These efforts are already influencing IFC’s investments. In Nigeria, where a high percentage of natural gas is flared in the country’s oil fields, for example, IFC is helping to monetize the wasted gas by investing in fertilizer plants that use the flared gas to produce nitrogen fertilizers. The production of fertilizers results in a significant amount of carbon dioxide emissions, but by using gas that otherwise would be flared, the overall GHG emissions are significantly reduced.

Guided by a set of best practices in the cement sector, IFC has invested in various waste heat recovery projects in middle-income countries such as Turkey and India. IFC also has financed several projects that use alternate fuels and raw materials (PDF) to manufacture cement.

In the steel sector, IFC is promoting investments in projects that will procure locally collected scrap for the operation of energy-efficient greenfield induction furnace or Electric Arc Furnace-based mini-mill scrap-based steel plants. Recent investments in the glass industry emphasize the use of cullet or recycled glass and the production of energy-efficient glass products for use in cars and buildings.

The $2.5 trillion fashion industry is responsible for around 10 percent of global GHG emissions. Several global fashion brands are moving toward sustainable practices. Levi Strauss & Co has been at the forefront of this trend. Levi Strauss and IFC are working with 42 designated Levi Strauss suppliers and mills to reduce GHG emissions by helping suppliers identify and implement appropriate renewable energy and water-saving interventions across 10 countries.

While these initiatives are noteworthy, much more needs to be done. There are two major challenges to reducing GHG emissions in industry: high-temperature heat requirements currently can be met only by using fossil fuels; and the reduction of non-fuel or process-related GHG emissions from ammonia, cement, ethylene and steel sectors that comprise almost 45 percent of overall emissions. These non-fuel emissions can be reduced only through major changes to raw materials and processes.

Meeting these challenges will require accelerated effort towards circular economy innovations to refashion products and processes, changes in human behavior, deeper energy efficiency improvements, electrification using renewable energy, use of hydrogen and biomass as feedstock or fuel, and carbon capture.

According to OECD estimates (PDF), a low emission pathway will require an additional 10 percent in overall infrastructure investment needs over the next 15 years. The good news is that the additional costs could be offset over time with fuel savings.

We are entering a period of unprecedented climate change disruptions that will redefine our comfort zones, challenge our perceptions and change the way we consume and produce. The very health of the planet hangs in the balance and increasing decarbonization of industry guided by sound investments is a critical part of the solution.

Andrew Cuomo’s latest power grab will let him ram through wind farms

Gov. Andrew Cuomo late last month amended his state-budget proposal to let him ram through approval of wind and solar “farms” over local objections. It’s a classic Cuomo power grab — outrageous both on the merits and in how he aims to pull it off.

As Robert Bryce has noted in The Post, many upstate and Long Island communities have been fighting to stop proposed solar- and (especially) wind-power plants that residents fear would scar or otherwise harm their communities.

But Cuomo is committed to the insane goal of having 70 percent of New York’s energy come from renewable sources by 2030. So he’s looking to cut the public out of the plant-approval process, which now requires an OK by a board that includes two local representatives.

His proposal would also allow the fast-tracking of “renewable” projects, further limiting the public’s ability to fight back before, say, a massive number of hideous wind turbines have been erected in a community.

Whatever the merits, this has nothing to do with the state budget; the gov aims to get it done in the budget simply to avoid real public debate. And by announcing it just weeks before the budget must pass, he gave critics even less time to try stopping it.

As Gerry Geist, director of the state Association of Towns, told the Lockport Union-Sun & Journal, Cuomo’s move would let him ignore local zoning laws and “you ought to make the case [publicly] if you’re going to go in that direction.”

Republican legislators will fight this, but they’re the minority in the Assembly and Senate. Count this as yet another test of whether “moderate” Democratic lawmakers from Long Island and the Hudson Valley are willing to sell out their constituents, as they did with last year’s no-bail law.

Why Is Everyone Talking About First Solar Stock? | The Motley Fool

First Solar (NASDAQ:FSLR)surprised investors with a fourth-quarter loss, and its results had a lot of information to unpack. But the company’s earnings and guidance are just a few of the reasons the company is a major topic of conversation in the renewables investing community. Here’s a look at some of the factors that could affect the company’s prospects as a long-term investment.

Solar panels produce electricity.

Image source: Getty Images.

Major changes are coming

First Solar’s surprising Q4 loss was largely the result of timing issues tied to asset sales and revenue recognition, and adverse weather, including a typhoon in Japan that damaged projects.The company has also seen some hiccups related to closing out manufacturing of its Series 4 solar modules in favor of ramping up production of the higher-capacity Series 6 version. 

The company manufactures the modules used to build solar projects and also develops and builds the projects itself, but said at the time of its Q4 results it is considering a sale of its development arm.

On the company’s Q4 conference call, management said challenges related to the business over the last few months have had  “significant impact” with respect to revenue and gross margin. “These challenges relate to both project sale and completion timing as well as higher expected cost due to adverse weather impact,” Chief Executive Officer Mark Widmar said. 

A sale could be a positive, not only for the potential boost to the company’s already robust balance sheet, but also to refine the company’s focus. Unloading the unit would allow First Solar to focus on its primary business, module production, particularly during the critical time when it launches its Series 6 model, which the company said is “largely sold out through the second quarter of 2021.”  

The company has been working to expand its manufacturing footprint for the Series 6 modules, which it touts as having higher energy yields at a more competitive cost. For 2020 the company expects to produce 5.7 gigawatts of Series 6 volume, which would represent a year-over-year increase of over 50%. “On the demand side, we ended 2019 with net bookings of 6.1 gigawatts and the current contracted backlog of 12.4 gigawatts,” the company said on its earnings conference call. “Our opportunity pipeline continues to grow going into 2020 with the global opportunity set of 18.1 gigawatts including mid-to-late stage opportunities 8.2 gigawatts.” 

A class action lawsuit is settled

Earlier this year First Solar disclosed the settlement of a class-action lawsuit. The suit, brought by a hedge fund controlled by Maverick Capital, alleged the company misled investors about the extent of manufacturing difficulties that ultimately affected earnings and share price for those who bought shares between April 2008 and February 2012. First Solar settled the suit for $350 million but did not admit wrongdoing.

It will pay out the settlement in the first quarter. The significant amount paid out by First Solar in the suit may not do a lot for investor confidence, but it is a positive for the company going forward because it eliminates one uncertainty that has been lingering for a few years. 

Is it time to invest?

First Solar recently marked 20 years since it launched operations. During that time it has underperformed the S&P 500 slightly, even as it benefited from federal subsidies for renewable energy and an unprecedented clean energy development boom. Over the past year things have been worse, with the company off by roughly 20 percentage points. Investors would be wise not to panic based on Q4’s surprises as the company was hurt by a typhoon, an issue that should not affect earnings on a recurring basis. It also saw problems in the development unit it is now looking to sell. More concerning is the fact that the company has been around for more than 20 years but does not yet pay a dividend despite excess cash on the balance sheet, and has failed to consistently turn a profit.

On the other hand, renewables demand shows no signs of slowing down, particularly as more corporations switch to 100% clean energy and states increase renewable energy mandates. So as the company puts a long-standing lawsuit behind it, pursues a significant sale, and prepares to launch a new line of panels, its best days could be ahead and it may be ready to show investors more stability and reward. Would-be investors would be wise to keep the company in their sights until the initial ramp-up of Series 6 panel production is complete to see if the launch translates into improved profitability for First Solar. 

Renewable energy finally takes off, as big money enters the industry

Global warming has been a contentious political argument for more than 15 years with little resolution.

Yet nothing unites corporations, politicians and investors quite like a return on investment. And now solar, after roiling fits and starts, has achieved industry-leading ROI.

The cost of solar systems has fallen quarter over quarter for about 10 years, according to Steve Comello, director of the Energy Business Innovations focus area at the Stanford Graduate School of Business. He said in a podcast that the cost to produce 1 kilowatt of solar electricity is competitive with wind, and is the cheapest form of electricity available when taking into account utility-scale systems installed in locations that receive full sun.

He estimates the so-called levelized cost of energy (LCOE) for utility-scale solar photovoltaic (PV) has plummeted as much as 400% in the past five years, beating coal and gas.

Big money

Companies including credit-card issuer Visa and investment firm Blackstone have taken notice of the cost savings and lower carbon footprint offered by renewable energy.

See: Beth Kindig runs a forum on tech stocks where she answers readers’ questions.

In 2018, Visa V, -3.85% set a goal of becoming 100% renewable energy-powered by this year. The company, which has 131 offices in 76 countries and four processing centers, recently said it met that goal. Operational emissions have been reduced by 90% compared with the baseline in 2014.

Last month, Blackstone announced a $850 million solar recapitalization investment in Altus Power. Altus has both public and private customers for its solar-array products, plus battery storage, which enables customers to resell power to the grid. The refinance will allow Altus to grow its portfolio to more than $1 billion in commercial and industrial solar assets.

Brookfield Renewable Partners is one of the world’s largest investors in renewable energy, with 76% of its allocation in hydro power. In a recent earnings call, the company estimated that over the next 10 years, $5 trillion to $10 trillion overall will be invested into renewable energy worldwide. China is on its road map with a 50/50 partnership to install 300 megawatts of rooftop solar projects over the next three years, with a broader 1-gigawatt development pipeline. That equates to 750,000 households. Notably, Brookfield is highly leveraged with $11 billion in long-term debt on the balance sheet.

Those commitments from large corporations and investment firms come at a time when renewable stocks are rallying. Plug Power PLUG, -14.95%  has almost tripled over the past 12 months, while SolarEdge SEDG, -4.88%  has more than tripled.

Meanwhile, U.S. oil stocks are hitting rock bottom. The graph, in a tweet below, shows U.S. energy stocks at the lowest price relative to S&P 500 Index SPX, -4.42%  since the Pearl Harbor attack in 1941.

Solar’s biggest endorsement comes from China, a heavily populated country with little access to oil. Currently, China is the world’s biggest emitter of carbon dioxide from fossil fuels. (When adjusted for population, the United States ranks even higher.)

China has been the biggest manufacturer of solar photovoltaics for some time. However, most recently the country has become the largest producer of solar-generated electricity. Across 344 Chinese cities, solar was found to produce energy at lower prices than the grid. Notably, this is an apples-to-apples comparison, as this did not include subsidies, providing a convincing argument for solar power.

China is poised to dwarf the U.S. on solar power through 2024, according to Wood Mackenzie. The renewable-energy-analysis firm is forecasting solar will flatline after 2020 due to tariffs imposed by President Trump. The tariffs, plus lower subsidies in the U.S., could prompt European countries to pull ahead of the United States.

India is forecast to become a growth market for renewable energy. The country has ambitions of reaching 175 gigawatts by 2022 compared to a capacity of 10 gigawatts in 2019.

Solar and battery stocks

Enphase Energy ENPH, -6.00%  sells micro-inverters that convert direct current to alternating current, with the advantage of harvesting optimum power even when a solar module fails due to debris or snow, or if it’s in the shade. The company also sells storage for backup energy in case of a system failure or to store energy for later use.

After its most recent earnings report, Enphase’s stock had a spectacular rise of 39% in one day after reporting a hefty increase in operating income to $102 million from $1.6 million. Still, the company is guiding for modest forward revenue for the first quarter of $200 million to $210 million, compared with $210 million in the fourth quarter.

In contrast to Enphase’s strong earnings report, First Solar FSLR, -4.03%  stumbled Friday after reporting a $59 million loss in the fourth quarter, or $0.56 a share, compared with an expected profit of $2.75 per share. Revenue came in at $1.4 billion, lower than the expected $1.7 billion. The company gave 2020 revenue guidance of $2.7 billion to $2.9 billion, a decline from 2019, adding a dose of reality to the optimistic world of renewable energy.

Nearly every fad has taken its turn in the investing limelight, including marijuana, e-cigarettes, “vegan” meat, cryptocurrencies and space travel. But there is evidence of real market demand driving solar, whether it’s from companies, investment firms or homeowners.

The main driver is cost savings due to the levelized cost of energy for solar undergoing a reverse curve. The best investments in solar will be global as China, and then India, go green.

The writer holds no shares in any companies mentioned.

Beth Kindig is a San Francisco-based technology analyst with more than a decade of experience in analyzing private and public technology companies. Kindig publishes a free newsletter on tech stocks at Beth.Technology and runs a premium research service.

IKEA reduces climate footprint for the first time

© Reuters. FILE PHOTO: The logo of Ikea is seen outside the Ikea Concept store, run by Inter Ikea brand and concept in Delft© Reuters. FILE PHOTO: The logo of Ikea is seen outside the Ikea Concept store, run by Inter Ikea brand and concept in Delft

STOCKHOLM (Reuters) – Carbon emissions throughout the full value chain of IKEA furniture fell for the first time last year, brand owner Inter IKEA said on Thursday citing increased use of renewable energy.

From the production of raw materials and products through to customers’ use and disposal, emissions shrank 4.3% in the fiscal year to the end of August 2019 to 24.9 million tonnes CO2 equivalents, it said.

“This was driven by a large increase of renewable energy in the production of IKEA products plus significant increases in energy efficiency of the lighting and appliances range,” it said in a statement.

The world’s biggest furniture brand’s retail sales grew 6.5% to 41 billion euros.

IKEA is aiming for its value chain to be climate positive – where it cuts more greenhouse gas emissions than it emits – by 2030.

That translates to a reduction by at least 15% to around 21 million tonnes CO2 equivalents, it said in its annual sustainability report.

IKEA produces around 10% of its range itself, mainly wood-based products, and sources the rest from suppliers.

To speed things up, in November in earmarked 100 million euros for encouraging direct suppliers to switch to renewable energy and an additional 100 million euros for projects to remove carbon from the atmosphere through reforestation and forest protection.

Helping store carbon already committed, besides capping emissions, is necessary to reach the target.

A growing number of large companies are now looking to do so. Microsoft (NASDAQ:) in January pledged to vacuum up all its historical emissions in its 45-year history.

Inter IKEA’s head of sustainability, Lena Pripp-Kovac, said she was hopeful emissions in IKEA’s value chain this year would shrink further.

Inter IKEA is the franchisor to store owners, of which Ingka is the main one.

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The solar panels on Jimmy Carter's farm in Georgia are powering half of his town

President Trump arrived in India on Monday for a state visit, and Monday’s Late Show noticed he had a little trouble pronouncing Indian names.

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Trump’s actually really popular in India, Trevor Noah said on Monday’s Daily Show. Some Indians “like him because of his anti-Muslim rhetoric, some like him because of his business savvy, and all of them like him because his skin looks like tikka masala.”

“Clearly, India is trying to give Trump a memorable experience,” Noah said. “There was, however, one tiny culture clash that Trump had to deal with” — Prime Minister Narendra Modi’s vegetarianism. “I honestly don’t know what’s stranger: the fact that Trump might eat vegetables, or that people are actually worried about how it will go,” he said. And “despite the beef issue,” Trump “even made an effort to show the Indian people how much he respects them by trying to speak their language.”

“After Trump butchered half the Hindi dictionary, Indian Twitter lost their minds,” Noah said. “But to those Indians, I say: please don’t be mad. Trump may not be able to pronounce Hindi words, but he can’t pronounce English words, either.”

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Yes, “because he was in India, Trump had to prove that English isn’t the only language he struggles with,” Stephen Colbert said at The Late Show. But Trump also had to face the “challenge” of Modi’s “plans to serve vegetarian food to the president. Oh my God, we’re going to war with India!” Upon landing in India, Colbert said, “Trump’s first stop was at the home of Mahatma Gandhi where he got the chance to spin a replica of the wheel that Gandhi used to make his own clothes. That’s lovely — now he knows what it’s like to work in one of Ivanka’s factories.”

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Trump also visited the Taj Mahal on Monday — and described it “as too understated,” James Corden joked at The Late Late Show. After the big rally, “local commentators said that Trump mispronounced the names of nearly every famous Indian official that he mentioned, as well as the name of the city was in,” he added, laughing. “Basically, what you get from this is that every time Trump goes to an Indian restaurant, he just goes, ‘Yeah, I’m gonna get that thing.'” Watch below. Peter Weber

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3 Top Energy Stocks to Buy Right Now | The Motley Fool

A global liquefied natural gas (LNG) glut, declining gas prices, project permitting stalls, and coronavirus concerns are only a few of the factors that have been weighing on energy markets and the companies within the underperforming sector.

But a Canadian pipeline builder, an LNG player, and a renewable fuel business could still be great additions to your portfolio. Here’s why investors should take a look at Enbridge (NYSE:ENB), Cheniere Energy Partners (NYSEMKT:CQP), and Clean Energy Fuels (NASDAQ:CLNE)

A worker stands in front of an energy project.

Image source: Getty Images.

New projects boosting cash flow

Enbridge, a Canadian oil and gas pipeline operator, seems like a good buy right now based on management’s actions to shore up the company’s financial footing and new projects put into service. Enbridge’s management attributes recent earnings improvement to a focus on a “low risk pipeline-utility model,” following through with asset sales, completing a three-year balance sheet strengthening plan, and starting up $9 billion worth of new revenue-producing assets over the course of the year.

In Q4 alone the company launched more than $7 billion in projects, including the Gray Oak pipeline and the German Hohe See offshore wind project, which represent a combined investment of nearly $2 billion for the company. The assets have long lives and contracts that should set investors up for long-term stable revenues.

Enbridge also recently showed improvement in its full year 2019 distributable cash flow (DCF), which increased to more than $9.2 billion from more than $7.6 billion in 2018, and it guided longer-term DCF growth in the range of 5% to 7%. The improvement could be the start of positive upswing following years of building new projects, the true extent of which hasn’t been seen since the projects have less than a year of operating history. 

Over the past year, the Canada-based company has underperformed the S&P 500, up roughly 15 percentage points. It is aiming for continued improvement with another $11 billion of what it characterizes as “secured organic growth projects” it will fund with equity. The company expects these projects to add “considerable EBITDA” as they come online, and management pointed out 2022 financial metrics may be higher than its target range based on these initiaitives and the chance of more non-core asset sales.

The company is an attractive option for the income investor based on a dividend yield at more than 5.7% and the company’s plan to increase its dividend by 9.8% for 2020. It is important for investors to note, however, that despite recent improvements, there is significant work remaining, since the company’s debt-to-equity ratio stands at more than 94%.  

LNG projects moving into operating stage

Cheniere Energy Partners is the operating partner of Cheniere Energy (NYSEMKT:LNG), a developer of LNG export projects in Texas and Louisiana. Cheniere is the marquee name in the US LNG export game in terms of scale and its early mover status on getting projects built and running.

Investing at the partnership level rather than the Cheniere Energy level may be preferable for some investors because it pays a dividend, recently yielding nearly 7%, even as the company continues to work with its general partner to expand its Corpus Christi and Sabine Pass projects. 

Shares of Cheniere Energy Partners were down roughly 15 percentage points over the past year, as earnings disappointed investors. However it is important to note that at the partnership level cash flow is typically seen as the key metric. In late January, the company said it would pay a cash distribution of $0.63 per share, which works out to $2.52 annually, within its guidance in the range of $2.55 to $2.65 for the year. 

In addition, one of the things that recently hurt revenue and EBITDA is higher operating costs and expenses, primarily as a result of putting projects into initial service. But it is not unusual for the initial start-up period known as “commissioning” to be a rocky time for projects as massive as Cheniere’s, and the situation may stabilize as the projects log more operating time and early kinks are resolved.

Cheniere’s management has also said that because it sells the majority of its LNG under long-term “take-or-pay” contracts, it has experienced losses linked to changes in fair value of derivative contracts to purchase natural gas for liquefaction, and the company should be expected to experience gains and losses associated with the underlying commodities related to forward gas contracts. 

So quarterly and even yearly ups and downs should be of little concern to the long-term investor considering a company that sees revenue contracted for periods as long as 20 years. It is important for investors to note, however, that Cheniere Energy Partners continues to carry a high debt burden, with a debt-to-total capital ratio of more than 96%, and this can be expected to remain as long as projects remain in construction. But the company has a solid record of opportunistically seeking refinancing in recent years, however, and has made progress in getting better terms. 

Renewable fuels gaining traction

Clean Energy Fuels (NASDAQ:CLNE) provides natural gas fuel and renewable natural gas fuel for the transportation industry in the U.S. and Canada, with a network of approximately 540 stations across North America that its owns or operates. The company is seeing sales pick up on its Redeem renewable commercial vehicle fuel, which reported a 30% boost in deliveries for 2019. It also got positive news when the federal production tax credit for renewable energy was extended at the end of last year. 

Clean Energy Fuels has outperformed the S&P 500 over the past year, up more than 40 percentage points, but that number should be taken with a grain of salt since share price is is down more than 80 percentage points over the past decade. More important for the longer-term investor is the company’s recent customer acquisitions, some which add several years of recurring revenue under contracts. This is the case with the company’s seven-year contract with UPS (NYSE:UPS) for 170 million gallons of fuel for its fleet of heavy-duty trucks.

Clean Energy Fuels does not yet pay a dividend, but has the potential to be a great growth play as contracted revenue increases. Over the past year the company has reached multi-year deals for Redeem fuel with additional corporations and other entities, including shuttle and bus operators, rental car businesses, a country Department of Public Works, and several California municipalities. The company also unveiled a plan to exclusively offer its zero-carbon Redeem fuel at all its stations by 2025, a timeline it says will beat other competing alternative fuels initiatives, which it estimates may not reach the zero-carbon finish line until 2045.

In the near term the company may face an uphill battle convincing certain companies to transition to natural gas as a transportation fuel, particularly in an environment in which oil is relatively cheap. But the company’s fuel contracts should continue to see new interest in regions with stringent environmental standards and as corporations continue to increase their use of renewables and work to decrease their carbon footprints, as they have in the case of corporate renewable power