Here’s the latest word from Energy and Capital newsletter:

I know what some of you are thinking: Perhaps it’s better to take a ‘wait and see’ approach to shale gas.

But you need some assurance that these unconventional gas fields are on the rise, just watch the big oil and gas companies scramble to get their piece of the pie.

Call it unconventional wisdom if you will, but the major players have made it known that shale gas is on the big thing. They’re aggressively going after the remaining unconventional hydrocarbons in the U.S.

Naturally, the immediate deal that comes to mind is the latest $31 billion deal between Exxon and XTO (Exxon will also assume $10 billion in XTO debt).

In today’s natural gas climate, it’s not about the short term. Exxon knows this. In the long term — maybe five or ten years down the road — this was a smart play by Exxon.

On the heels of the Exxon-XTO deal was another giant oil company. French oil company Total shelled out $2.25 billion for a 25% stake in Chesapeake’s Barnett assets. According to the deal, Total will pay out $800 million, as well as $1.44 billion to finance drilling operations in the Barnett through 2012.

Another oil supermajor, BP, is also making its move into the U.S. shale plays. In 2008, the company struck a $1.1 billion deal for Chesapeake’s assets in the Fayetteville shale.

Recently, however, BP recently announced another deal. This time it’s with Lewis Energy. BP is looking to grab a 50% stake in approximately 80,000 acres of the Eagle Ford shale. I’ve covered the Eagle Ford Shale formation in the past, and it also happens to be one of my favorite up-and-coming shale plays in the U.S.

Not convinced yet?

Last month, Schlumberger Ltd. announced an $11 billion all-stock deal for Smith International. Schlumberger CEO Andrew Gould reiterated their bullish stance on unconventional oil and gas, saying: “There isn’t any doubt that long-term shale gas is going to be one of the big new energy sources both in the U.S. and overseas.” Smith International brings a wealth of shale gas drilling knowledge to the table.

If one thing has become obvious from these companies scrambling hand over fist for their own stake, it’s that shale gas will become a game-changer over the next few years. You’ll be able to take that to the bank.

More here.

Why is unconventional gas on the rise? Because, obviously, conventional gas is getting ‘played out’ long term, at least in the US.

This spells higher costs for energy, which tends to be good for alternative fuels.

Riggs

The Digest comments today:

US companies reporting early commercialization in 2-3 years; “People who are more realistic think this will take at least 10 years”, cautions Sandia’s Pate.

News and views from the European Algae Biomass Association as well as presenters at the American Association for the Advancement of Science annual conference in San Diego offered news on business models, new research and timelines for algal fuel commercialization.

In California, Scientific American is reporting on co-location schemes for access to carbon dioxide or wastewater. “Various scientists speaking at the American Association for the Advancement of Science annual conference, which wraps up here today, were promoting the notion that algae operations should be located next to industries that can supply one or more of the nutrient streams.

In Europe, the European Algae Biomass Association said that its Scientific Committee “confirmed that a low cost, low carbon production of algae biofuels is an attainable technology objective for industrial development”.

Also in California, Sandia National Laboratory researcher Ron Pate said that “People who are more realistic think this will take at least 10 years for research and investments to get it to the point where [algal fuels]  has commercial viability. I think the jury’s still out, but we’ll likely see an impact in the next decade.” Pate gave a “Resources, Methods, and Approaches for Algae Production,” at the AAAS annual conference.2 years or ten years? More on the story at biofuelsdigest.com.

 

Thanks Jim for a great roundup! (My personal vote was 4-9 years.)

Riggs

The feed-in tariff (FIT) that the biggest economy in Europe has used to stimulate its domestic photovoltaic (PV) market for the past decade is about to be cut by double digits. It’s partly a response to fiscal pressure and complaints from some constituents, but Chancellor Angela Merkel and her center-right Bundestag (German parliament) colleagues hope to maintain market dominance despite the changes.

Here’s how the drafted FIT shift breaks down:

• Rooftop solar PV installations will see a subsidy cut of 16%.

• Ground-based modules installed in yards and other open, non-arable patches of land will be 15% less funded by the changed FIT.

• PV projects at dumps and old army bases, which along with contaminated industrial plots are called “brownfields,” are set for an 11% cut.

The most dramatic shift we can expect in the second half of 2010 is a complete elimination of incentives for large solar panel arrays on arable land. State news agency Deutsche Welle reports that farmers have been crying foul about investors snapping up fertile tracts to “harvest the sunshine.” MP Peter Altmaier, a leader of Angela Merkel’s own Christian Democratic Union party, insists, “There must be no more panels installed on arable land.”

More here from the Green Chip Review.

This is the downside of governmental subsidies: they can be taken away. But solar is well on its way in China and elsewhere.

Riggs

According to Green Chip Review:

Last year, Chinese companies produced about 50% of the world’s solar cells. And that’s likely to rise to 70% in the next few years, as costs continue to fall more quickly there than in Europe or the U.S. In fact, firms based in Germany — the cradle of the modern solar industry — have been finding it’s cheaper to buy from the Chinese than it is to make their own solar cells.

And they’re not just ramping up production; solar installations are also on the upswing. China will meet its 2020 target of 1.8 GW next year, and Greentech Media is forecasting installed solar capacity could actually hit 10 GW in the next decade, implying a 450% expansion.

Wind energy is witnessing a similar scenario. The Global Wind Energy Council (GWEC) has reported that China “doubled its entire installed capacity each year since 2005.” Last year, they became the largest wind market in the world, installing 13 GW compared to 10.5 GW in Europe and 9.9 GW in the U.S.

That growth is largely due to a booming Chinese wind manufacturing market. Producers like Sinovel and Goldwind are already top ten globally, and could soon threaten companies like GE and Suzlon that currently inhabit the top five.

The Chinese cleantech production model is so robust that it’s now being exported around the globe, in much the same way that other Asian countries have taken automobile manufacturing abroad.

In the 2010 Dodgen Lecture at the annual meeting of the Mississippi Academy of Sciences, and in the Q&A that followed, Digest editor Jim Lane described Four Principles that he suggested must be observed in order to successfully complete the transition away from a fossil-fuel based society. An abridged version follows – the full text is here.

1. The right to clean, affordable energy is a fundamental component of “Freedom from Want”.

2. Energy must be consumed within the radius that it is produced. Long-distance transportation systems for energy reduce sustainability imperatives to price mechanisms which cannot account for the hidden social and environmental costs of energy.

3. An energy finance system must permit individuals to participate, through investment, in broad, de-risked pools of renewable energy assets. If the small investor only participates in the transition away from fossil-fuel based society through higher energy prices (or taxes) and through unsustainable investments in fossil-fuel based companies, the transition cannot succeed.

4. Energy must be recognized as a special class of investment for the purposes of modeling indirect job creation and economic impact of project development.

The expanded text of the Four Principles is at biofuelsdigest.com.

We are particularly interested in Freedom #2 – because we believe that localized energy will transform society.

Riggs

“The pieces are now — or will soon be — in place to enable an explosion of distributed renewable energy in the U.S. It has the technology, the financial mechanisms, the public sentiment, and the right cost of entry: zero. It will not be stymied by musty regulations, utility opposition, or even the recalcitrance of banks.

Solar manufacturers, smart grid players, progressive but risk-averse capital, and most of all the public stand to benefit handsomely.”

Read the full article in Green Chip

A very smart overview, including a review of developments in the exciting area of FITs (Feed-In Tariffs).

Riggs

The Obama Administration recognizes this reality and strongly endorsed the biofuels agenda last week….

With China and other rapidly developing countries acting like a vice on the global crude market, biofuels are rapidly becoming a strategic necessity for the United States, not just a means to mitigate greenhouse gases or create jobs…

Over the past two years, Saudi oil exports to China have increased by 60 percent. And in the meantime, the Chinese appetite for crude continues to grow and grow. Chinese crude oil imports could surge by more than 40 percent over the next three months after hitting an all-time high of 5 million barrels per day in December. The share of Saudi crude in the Chinese markets has now increased from 16 percent to 20 percent. China and Saudi Arabia also aim to boost bilateral trade by at least 50 percent to $60 billion by 2015, the Chinese Trade Minister Chen Deming said last month…

Read the CleanTechies article

Hat Tip to Kelly Lefkowitz

Comment: this is HUGE for the algae industry as we are finally seeing coordinated and concerted action by the government in support of algae as a drop-in biofuel that does NOT need vast infrastructure upgrades.

From Biofuels Digest:

Sweeping changes ordered in US biofuels policy: “Will not make 36 billion gallon target” without change; shift to advanced biofuels; RFS2 released – corn ethanol, biodiesel now OK; USDA to drive commercialization, feedstocks; DOE to drive advanced research.

In Washington, the Obama Administration issued a sweeping new set of rules and directives regarding US biofuels policy, including the release of the revised Renewable Fuel Standard from EPA, and a new set of “Lead Agency” assignments to support first-generation biofuels while driving the development and commercialization of advanced fuels, with a forces on drop-in fuels for aviation and ground transportation.

The announcement followed 14-page report from the Biofuels Policy Working Group – chaired by Agriculture Secretary Vilsack, Energy Secretary Chu, and EPA Administrator Jackson – that found that US biofuels targets for 2022 will not be met unless the US government undertakes to re-organize its development effort. Here are the highlights from the announcements:

RFS2 – the Renewable Fuel Standard
The EPA has recalibrated the targets and categories originally established by Congress in 2007 in the Energy Independence and Security Act. The overall target of 36 billion gallons of biofuels by 2022 has been affirmed.

What qualifies under RFS2?
After a disastrously received first draft on indirect land use change which provisionally wiped out biodiesel and new, high efficiency corn ethanol as qualifying fuels last year, the EPA has found in its revised models that high-efficiency corn ethanol, biodiesel as well as all advanced biofuels made from biomass will qualify under RFS.

Lead Agencies
The Administration announced a “Lead Agency” strategy on biofuels aimed at clearing logjams and confusion over responsibilities.

DOE leads on: Discovery Science, Pilot-scale Conversion and Biorefinery facilities; Financing for innovative first time commercial technologies.

USDA leads on: Feedstock Production Systems; Feedstock Development; Feedstock Supply Chain Workforce Development; Dissemination of Best Practices and Technical Assistance; Continuing financing for 1st generation and scaling of advanced biofuels.

USDA/EPA jointly lead on: Sustainability and Regulatory compliance.

USDA/DOE jointly lead on : Full-scale deployment of commercial facilities.

FULL coverage at BiofuelsDigest.com, including:

RFS2 Mandates, new targets and dates
RFS2 – Greenhouse Gas emission reductions, by the numbers
New commitments on project management and new USDA feedstock research centers
The New BCAP (biomasss Crop Assistance Program) rules
RFS2 final rules as issued by EPA
The twitter feed from the press conference with Secretary Vilsack, Administrator Jackson, Secretary Chu, Secretary Salazar and White House energy policy chief Carol Browner.
Industry reaction from 16 CEOs and NGOs.
Biofuels Digest’s editorial

Riggs

from Dow Jones:

President’s Working Group To Offer Agenda To Boost Biofuels

An interagency biofuels group created by U.S. President Barack Obama is set Wednesday to outline a broad agenda for ensuring the U.S. increases the amount of biofuels used in cars, trucks, and airplanes.

The President’s Interagency Working Group will say the U.S. is not on track to meet the federal mandates of adding 36 billion gallons of biofuels to the fuel supply year by 2022 and adding 100 million gallons of cellulosic ethanol this year. The group will cite a lack of financing stemming from a prolonged U.S. economic recession and insufficient coordination among government agencies as part of the problem.

On financing, the group will say that U.S. Energy Department and Agriculture Department research and loan-guarantee programs “could be targeted more effectively to support the emerging industry.” Developers of next-generation biofuels have complained that Energy Department loan guarantees were difficult to win because the industry’s economics didn’t fit neatly into traditional project finance models.

The group will suggest the Environmental Protection Agency could lift a current regulation that limits the amount of ethanol in the gasoline supply to 10%, a blend known as E10, “if the DOE testing program validates the suitability of E15 or E20 in light-duty vehicles.” The EPA has promised to make a decision by mid-year. But the group will also raise a warning about the ability of the existing fuel distribution system to accommodate gasoline with higher ethanol concentrations.

Saying that higher-concentration ethanol blends will require investment in a new storage and distribution structure, the group will suggest that “expansion of the biofuels industry should focus on advanced biofuels and direct substitute fuels that can leverage the existing American multitrillion-dollar liquidfuels infrastructure.” That would be a boost to emerging companies developing so- called drop-in fuels, which are hydrocarbons made from plants that are already being tested in airplanes.

“Significant users of liquid fuels, such as the air transportation industry and the military, have needs that cannot be fully met today by ethanol or electric power sources,” the group will say.

The group will nod to concerns that were raised two years ago about the risks that the expanding ethanolindustry was causing a hike in food prices by taking over land used for growing food. The group will say that “more intensive, multiple-year management strategies could be used to get greater production from the same amount of land, and thus reduce pressure to expand production onto environmentally sensitive or marginally viable lands.”

The group will also say that as more farms and forests are used to make biofuels, “careful consideration of feedstock production practices and location of biomass conversion plants will be required to avoid serious impacts on existing food, feed, and fiber markets and the quality of natural resources upon which we all depend for clean air and water.”

The group will suggest the U.S. government should use more biofuels in its flex-fuel vehicles, especially in the urban areas of the upper Midwest.