january 2010 "investing in the future of energy" newsletter

8/8/2019 January 2010 "Investing in the Future of Energy" Newsletter

1/5

Newsletter January 2011

obal Fund Exchange is a global

set management business

hich invests across all areas of

e New Energy Revolution.

e focus on:

Clean Energy

Water

Agriculture

Traditional Energy

Natural Resources

Carbon & Emissions

Systematic Trading

Hedge Strategies

this issue:

Chinas Five Year Plan

U.S. Natural Gas

Indias Solar Power

Bull Rally in Oil

Desertification Risks

Investing in Desalination

ick to request one-on-one

ll with Portfolio Manager

SPOTLIGHT ON: CHINAS FIVE-YEAR PLAN

Chinas 12th Five Year Plan Emphasizes Global Energy

Leadership and Resource Efficiency

As Chinas 12th Five Year plan (2011-2015) takes effect, lawmakers are

focused on transforming China from a net importer of old energy such as

coal, oil and liquefied natural gas (LNG) into an exporter of new energy and

efficiency technologies.

Chinese investment in clean energy has grown by leaps and bounds in recent

years, and the nation has surpassed the United States and other European

nations to become the worlds leading clean energy investor. Chinese

policymakers are aware that maintaining this high growth will require federal

support, favorable policies and more investment into technology R&D.

There are three main threads in this 12th Five Year Plan as related to energy,

says Wang Yusuo, vice-chairman of the China Chamber of Commerce and

member of the Standing Committee of the National Chinese Peoples Political

Consultative Conference (CPPCC), including:

1. Shift in mentality from natural resources are king to natural resources

and technology both are king, leading to less reliance on foreign resource

imports and more tech innovation and clean energy generation at home.

2. Emphasis on efficiency as a source of value for businesses. Production

scale is not the only driver of cost savings efficiency can reduce

environmental costs for businesses.3. Move towards smaller, distributed energy generation, away from large

central power hubs to encourage development of regional energy enterprises.

China clearly sees itself as a central player in the global emerging energy

industry, and will implement policy as necessary to achieve its goals. In the

future, what China exports will not merely be such low-end goods as shoes,

socks and lighters, remarked one official. Through the export of equipment

that manufactures energy, we may become exporters of energy.

212 570 7970

obalfundexchange.com GLOBAL FUND EXCHANGE LTD
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2/5

Wind Energy to Power New Yorks Empire

State Building

New York Citys iconic Empire State Building just became

greener through a major wind power purchase.

The tallest skyscraper in the city recently signed a two year

contract with Green Mountain Energy to purchase RenewabEnergy Certificates (RECs) to offset the buildings entire

energy consumption at nearly 55 million kWh of energy a

year.

The Empire State Buildings wind energy purchase follows a

$500 million energy efficiency upgrade conducted on the

building last year.

By replacing 6,500 windows, upgrading ventilation and

insulation and installing smart meter systems, the Empire

State Building was able to reduce total energy usage by 40%

Anthony Malkin, president of Malkin Holdings which

supervises the Empire State Building, said it was a natural f

for us to combine clean energy with our nearly completed

energy efficiency retrofit work.

RENEWABLE ENERGY NEWS

India Quadruples Renewable Energy

Goals

The Indian government has quadrupled its renewable

energy targets as part of a national plan to reduce the

carbon intensity of its economy. India now aims to install

74.4GW of renewable energy by 2022. This will help to

achieve a 20-25% reduction in economic carbon intensity(measured in carbon emissions per unit of GDP) by 20-

25% of 2005 levels over the next decade.

Solar energy is a major focus of Indias plan. India is

looking to take advantage of its plentiful sunlight with

20GW of new solar power by 2022. It is also installing

2GW of off-grid distributed capacity, which is important

for rural regions currently lacking access to electricity.

Last year, Indias Jawaharlal Nehru National Solar Mission

was given a mandate to monitor and manage the

countrys new solar installations. The Mission is aiming to

achieve grid parity by 2022, and by 2030 achieve cost

parity with coal, currently Indias predominant energy

source.

WATER NEWS

Global Desalination Investment to

Double Within 6 Years

Investment in desalination plants around the world ispredicted to double over the next six years, says a new

report from market research firm Pike Research. By 2016,

nearly $87.8bn cumulative capital is expected to flow into

the sector.

The costs of many key technologies have fallen, making

construction of seawater desalination plants more cost-

effective for many countries and municipalities, especially

in water-scarce regions.

Desalination market growth is being driven by acombination of dwindling water resources, population

growth and urbanization, and lower desalination costs,

says Pike Research president Clint Wheelock.

Because initial construction of desalination plants is

especially capital-intensive, Wheelock expects the

lingering effects of the financial crisis to slow down the

market over the next two years. However, the outlook

for the longer term remains strong, and we anticipate

that desalination capital investment will double within six

years.


3/5

Graph: Oil Production & Consumption in China, 200-2009

RADITIONAL ENERGY NEWS

l Kicks off 2011 with Bullish Rally

prices have kicked off the new year to a fast start with a

l rally, which many analysts believe is here to stay. Signs of

reased economic recovery across the globe combined with

all in U.S. crude inventories for the fifth week in a row have

tributed to the run in oil prices.

clay Capital analysts see strong oil demand going forward,

ticularly from China, and expect oil demand in Q4 2011 to

ak 90 million barrels per day for the first time. They also

esee a slowdown in non-OPEC oil supply, which Barclays

s is slowly grinding to a halt. Without interference from

EC, oil prices will likely reach $100/barrel. OPECs decision

roll over existing (and often loosely enforced) production

otas into 2011 is indicative that the cartel is unlikely to take

ong mitigating action to keep barrel prices in the so-called

mfortable range of $70-$90. On the contrary, recent

ding has brought prices up to nearly $100/barrel.

gional politics will become more important as new

ource discoveries are made and exploited in countries such

Nigeria and Iraq. Finally, Barclays predicts continued

rket volatility due to speculation and a trimming of spare

acity. In the past, the rough boundary of 5% of spare

acity has often represented the border between highly

atile markets and calmer conditions, the bank writes.

nd managers are acting on bullish predictions of their own.

ording to CFTC position reports, hedge fund bets on crude

ve reached their highest levels in nearly four years. Net-g positions increased by 4.6% in the week leading up to Dec

h, the largest total since June 2006.

hinese Oil Refineries Running at Full

pacity to Meet Demand

nese oil refineries have been running at full steam this

nter, with the nation consuming 13% more oil this past

vember than during the same month in 2009, says a report

m Platts news service. High demand levels are keeping

nese domestic refineries churning at full speed.

nopec and PetroChina kept refinery run rates high in

vember after being told by Beijing to ensure sufficient

pplies of diesel, he said in a statement.

e surging Chinese economy has redefined the global

ergy sector according to the International Energy Agency

A) as China has surpassed the United States as the worlds

gest consumer of energy.

data shows Chinese energy consumption outpaced that of

U.S. by 4% in 2009. Until that point, the report said, the

. had been the largest energy consumer in the world since

dawn of the 20th century.

Source: U.S. Department of Energy

Swimming in Gas, EIA Doubles Natural

Gas Reserve Estimates in the United State

The United States is swimming with gas, according to the

latest report from the U.S. Energy Information

Administration (EIA), which now says total recoverable

reserves of natural gas are much more than previously

estimated. These gas resources will have a significant

impact on the nations energy mix over the next 25 years.

In its Annual Energy Outlook for 2011 report, the EIA more

than doubled its central natural gas reserve estimates; from353,000bn cubic feet to 827,000bn cubic feet. This is

enough to supply entire U.S. gas demand for 36 years.

The combination of plentiful reserves, low prices, and high

productivity of new drilling techniques such as hydraulic

fracturing or fracking has catalyzed investment in

liquefied natural gas (LNG) production. Exports of LNG to

booming Asian markets seeking foreign energy resources,

and is poised for growth as demand continues to mount in

these markets.

Natural gas is increasingly being used as transportation fue

in place of high-priced gasoline. Many vehicle engines are

being built specifically to use natural gas, or being retrofitte

to accept LNG or compressed natural gas as fuel.

Because they burn cleaner than gasoline or diesel, natural

gas present an attractive transportation fuel alternative in a

increasingly emissions-conscious world.


4/5

A carbon exchange may be an effective, market-driven

solution to expand energy efficiency in contrast to drastic,

state-driven actions.

Analysts predict China will move fast on this issue. Whateve

China decides to do, they do it quickly, notes Ashok Bhargav

senior energy specialist at the Asian Development Bank. Chin

has shown a lot of commitments, and interest now in

developing domestic carbon trading. We expect something

should be up and running about it very soon.

U.S. Carbon Market Transforms as

CCX Closes and California Market Opens

Voluntary carbon trading in the United States is undergoing a

major change as a flagship exchange closes, while another up-

and-coming market gains approval from California voters.

The Chicago Climate Exchange (CCX) and its founder Richard

Sandor announced it has concluded operations and will notring in a new trading cycle for 2011. Launched in 2003, the C

was hailed as a progressive, market-driven method to provide

profit incentives for businesses to become more efficient and

reduce emissions. It was the first such exchange in the United

States to allow companies to buy and sell Carbon Emission

Reduction credits (CERs) and ushered in a revolutionary

introduction to the carbon trade already underway in Europe.

Despite the CCXs close, voluntary carbon trading is alive and

well in the United States. Californias new mandatory

emissions trading program and the Regional Greenhouse Gas

Initiative (RGGI) in the Northeast present new avenues forexpansion of the carbon trade.

Many policy analysts are optimistic that state governments wi

move ahead with various carbon regulation or trading

programs. Although establishing a federal trading system is th

ultimate goal, state legislatures are not waiting around to beg

their own regional initiatives.

These new state programs are perhaps stronger as a result o

the initial CCX experiment. The point was to get companies

familiar with allowances and trading, and how to do that and

how to use offsets and exchange them on a platform. And thahas all been accomplished, so with the advent of mandatory

programs like RGGI and now California the sort of

experimental value of CCX as it was is over, noted Lisa Zelljad

an analyst at Point Carbon. Definitely the businesses that

participated in CCX have gained some valuable experience.

CARBON NEWS

China Explores Domestic Carbon Market

Launch to Boost Energy Efficiency

As part of a nation-wide drive to reduce energy usage and

boost business energy efficiency, China is seriously

considering launching a domestic carbon emissions

trading program.

Since 2005, China has been a part of the United Nations-

backed Clean Development Mechanism (CDM). By

undertaking various emissions reduction projects, China has

been eligible to earn emissions credits which can then be

traded on global carbon exchanges, most prominently the

European Union Emissions Trading Scheme (EU ETS).

However, many European purchasers are moving away

from investing in China-based projects and towards

sponsoring projects in lesser-developed nations. Although

t is not subject to the same standards as other

ndustrialized nations in the existing Kyoto Protocol, China

s the worlds second largest economy. For this reason,

many doubt the long term viability of Chinas role in the

CDM, and advocate instead for the launching of a domestic

exchange.

A China-based carbon exchange may also catalyze energyefficiency initiatives among Chinese businesses. Officials

say increasing energy efficiency will help keep Chinese

businesses competitive on the global stage, and also help

China achieve its pledge to cut the carbon intensity of its

economy 40%-45% by 2020.

Chinas energy use is sky high because nearly 70% of

energy needs are met with coal, a high-emitting fuel. Last

summer, Beijing shut 2,000 inefficient factories across the

country, a decision which did result in energy savings, but

came under fire from a social and employment standpoint.


5/5

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SOURCES

We regularly gather information from the following reputable sources, including but not limited to:

Bloomberg New Energy Finance RenewableEnergyWorld.com

Financial Times EnergyandCapital.com

Forbes.com: Energy News The Wall Street Journal

Green. The New York Times Streetwise Reports: The Energy Report

New Energy World Network Thomson Reuters

Scientific American REChargeNews.com

SustainableBusiness.com Climate Change Business Journal

U.S. Energy Information Administration (EIA) Commodity Futures Trading Commission

GLOBAL FUND EXCHANGE LTD.

AGRICULTURE NEWS

Advancing Desertification Puts Chinese Water and Crop Supplies at Risk

Chinas desertification crisis is straining national cropland and putting

the populous nations food and water supplies at risk. About 1.73

million sq. km nearly 25% of all land in China is currently desert

land or land that is becoming desert. A small portion of that land can

be treated to reclaim soil fertility, but thus far investment has been

insufficient.

Liu Tuo, head of Chinese anti-desertification efforts, estimates it

would take 300 years to roll back the advancing desert in China,

which could worsen further as a result of climate change. Climate

change could cause extreme weather, such as drought, which will

have a very serious impact upon desertification, he said.

China has struggled with sky high food prices, and as industrialization grows and standard of living improves, these

problems will likely worsen with time. Ensuring Chinas population has access to secure water and agricultural resources is

essential. Without sufficient attention, creeping desertification in China may become a real crisis with significant impacts

on food and water supplies.
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january 2010 "investing in the future of energy" newsletter

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