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Weekly Energy Update: Is the Renewable Energy Sector in Retreat

Weekly Energy Update: Is the Renewable Energy Sector in Retreat

Energy gets cleaner, but its money gets dirtier; renewable energy suffers more ups and downs; the oil and gas industry balks at a new EPA proposal to cut sulfur levels in gasoline; and our latest interview and premium subscriber offerings …

This week all eyes are on the disturbing reality that renewable energy and its lucrative subsidies have become the playthings of the underworld. It hit home specifically with the Italian authorities’ seizure this week of the massive wind and solar energy assets of a mafia-linked figure, Vito Nicastri. The total take here was 43 wind and solar energy companies and 66 bank accounts belonging to the mafia. The bottom line here is that the renewable energy business and its subsidies are very convenient tools for laundering money. The Italian seizure will bring broader scrutiny to the renewable energy business and the subsidies that have helped it get this far.

Elsewhere, wind is having its ups and downs. While there is a veritable boom in the Texas panhandle, where wind turbines are providing over 9% of the state’s electricity and $3 billion in further wind investment is expected over the next two years, it is fighting a pitched battle for survival in other states.

In North Carolina, state house lawmakers are working to rollback renewables with a proposal to freeze and repeal the state’s renewable energy standards. Those who have invested heavily in the state’s renewable energy are necessarily concerned. Strata Solar, for instance, has invested around $200 million in 10 solar farms in North Carolina and is planning another $500 million injection for around 30 more projects. Funding for these projects would be hard to get if North Carolina repeals its renewable energy standards because it would send a negative message to investors. Some economists are also concerned about the repeal attempt, saying that so far the renewable energy standard has landed the state $1.4 billion in investments since 2007 and created 21,000 job-years. The tax revenues from the solar boom, they say, would end. Those initiating the repeal say the price of renewable energy is too high and taxpayers are subsidizing the sector.

The wind sector also took a hit in confidence this week when BP announced plans to sell its US wind farm operations as it retreats from the renewable energy scene in order to boost its core oil and gas operations. While this is largely to cover its liability costs after the 2010 Gulf of Mexico spill, investors don’t like the trend. 

Is the renewable energy sector in retreat as some scaremongers would have us believe? Not quite yet, but it is definitely under siege and the public will demand greater scrutiny now that the underworld has been decisively tied to the business. 

In the meantime, the EPA continues to move forward with new regulations. Following on the controversial ethanol mandate, the EPA has now proposed standards (the Tier 3 rule) to cut the amount of sulfur in gasoline by two-thirds by 2017. According to the EPA, the standards will cost $3.4 billion by 2017, but will save up to $23 billion in health-related costs. Sulfur negatively affects catalytic converters, releasing increased pollutants into the air, which is in turn linked to adverse health conditions such as heart and lung problems. The aim is also to reduce emissions of nitrous oxides and particulate matter, which form smog. The EPA calls them “common-sense standards” that will save lives and money. The oil and gas industry says they will raise the price of gasoline at the pumps by raising production costs by around 9 cents per gallon. The industry is balking at what they estimate will be another $10 billion in infrastructure investment and $2.4 billion in increased annual operating costs to implement the standards. The auto industry is also balking at the proposal, saying it will render gasoline the same price as in Europe. 

Please don’t miss our interview this week with the CEO of Africa Hydrocarbons, who lets us into the secret of Tunisia and why this is a great game for the juniors. He also gives us the run-down of some of Africa’s most convenient potential oil and gas plays.

Also this week, for our premium subscribers, we examine Middle East shale opportunities, and our trend section looks at coming developments in fracking technology and the opportunities this will provide to investors who are in early.

This week’s special report comes from Inside Investor in Oilprice.com Premium where Dan Dicker looks at why the last week has been so hard on energy investors and a sector that could soon provide exceptional returns in the future. This is a trend you want to be aware of now.

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Leave a comment
  • Kyle Sager on April 06 2013 said:
    Mafia tries a million ways to make dirty money more legit and extract it. Always has, always will.

    This piece seems inclined to imply that since wind became a target for abuse by the Mafia it's a dirty industry.

    "Lucrative subsidies:" Yawn. Do we really need to start comparing global fossil fuel and renewable subsidies.

    "Industry in retreat?" Hardly it gets cheaper and cheaper. It is getting jerked around, however, by governments that give bigger aggregate subsidies and protections to fossil fuels globally while jerking renewable energies around with unstable subsidies that throw it off balance. Se la vi. Renewables just keep getting cheaper...Fossil fuels keep getting harder to pry out of the ground...and the stale question "Are renewables going away?"...is so ancient and cliche at this point I'll read the first half again tonight to help put myself to sleep.

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