Wall St. Speculation Alive And Well In Clean Tech: Risky Business
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10/6/09 BBC article entitled Downturn is 'climate opportunity' relayed the message from the International Energy Agency (IEA) that "the global recession provides a window of opportunity to curb climate change and build a low-carbon future". A few key points from the article:
- [the IEA's] prescription would lead to greenhouse gas concentrations being stabilised at the equivalent of 450 parts per million (ppm) of carbon dioxide - a level that, according to some analyses, offers a good chance that the rise in the global average temperature since pre-industrial times could be kept within 2C.
- Without these policies, the agency calculates that concentrations will soar to 1,000ppm by mid-century - levels that, in many scientists' views, would lead to catastrophic and irreversible consequences.
- But political and financial capital needs to be invested soon if the world is to follow the 450ppm path, it says, with emissions needing to peak around 2020.
The article included the following graph showing potential Co2 emissions and reductions, revealing that approximately one half of reductions from the reference scenario result through "End-use efficiency":
This brings us to our primary topic: companies that manufacture electric batteries for cars and other applications (i.e. end-use efficiency). We previously commented on this sector in our post,
Berkshire Hathaway's BYD Purchase - Great "Trade" yet Long-Term Economics are Critical Question in July. In that analysis, we noted the following regarding BYD based on the company's 2008 annual report:
- Gigantic revenue growth
- But, margin compression
- And, low return metrics
- With huge capital consumption to fund growth
- Quick conclusion: the facts tell us that BYD operates in a low margin, low return, competitive business that consumes significant capital.
In August, we continued our "clean tech" analysis with
Competition for BYD and Divergent Views on "Green" Cars - EVs versus Hybrids. In addition to competition from the auto makers mentioned in that post, we are aware of other companies aggressively seeking market share in the battery segment: Ener1 (HEV, $7.04) and A123 Systems (AONE, $23.06).
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