Ontario Electricity Generation on a Hot Day

Today is a hot day in Toronto. The temperature is 34 degrees and it is only 2 pm. Toronto's Medical Officer has upgraded the heat alert to an extreme heat alert. Cities across the province are finding it very hot as well.
On hot days like today, demand for air conditioning swells. Air conditioning requires electricity, so what fuel sources are being used to generate electricity?

Source	MW	%
Nuclear	10857	45.31
Hydro	4658	19.44
Gas	5410	22.58
Coal	1722	7.19
Wind	441	1.84
Other	873	3.64
Total	23961	100
source:http://www.ieso.ca/
Fuels used to meet demand Jun. 20 - 12:00-13:00

Nuclear is the most important fuel. Nuclear, hydro and natural gas provide 87.3% of the fuel. Other refers to wood waste, biogas, solar, etc. Electricity generation in Ontario is very dependent on nuclear. For the year to date, nuclear has accounted for 56.9% of the fuel used to generate electricity in Ontario. Renewables make up a relatively small proportion of total fuel source. Notice that coal, which used to be a big fuel source, now accounts for just 2.7% of total fuel usage.

Today's electricity demand is projected to peak is 24,267 MW at 5 pm.
The summer record was 27,005 MW on August 1, 2006.

Sustainable Investing vs Wine and Gold

What do sustainable investments, wine and gold have in common over the past ten years? Well, for one thing, investments in wine and gold have vastly outperformed an investment in sustainable companies.Below is a chart showing the performance of wine (measured by the Live Ex Fine Wine 100 Index), sustainable equities (as measured by the Dow Jones Sustainability Index), gold (the front month futures contract on COMEX gold), and the S&P500.

Sharpe ratios show that wine has been the best investment followed closely by gold. The S&P 500 has a slightly larger Sharpe ratio then the Dow Jones Sustainability Index, but both Sharpe ratios are negative over the sample period.

wine	djsi	sp500	gold
0.79	-0.12	-0.06	0.78

To combine the concepts of sustainability and wine together, how about a sustainability wine index? An example of this would be an index that follows organic wines. 

CAPE Values for April 2012

I am a  follower of Robert Shiller's cyclically adjusted p/e ratio (CAPE). The CAPE seems to work reasonably well for the US and I am always interested in what CAPEs look like for other countries. To date, however, Mebane Faber is the only person that I am aware of that does this type of calculation for other countries.I have taken the data  from his recent post and ranked the countries according to CAPE. Italy, Spain, Netherlands and Belgium all have CAPE values below 10. Notice these are all European countries. Canada and the US have high CAPE values.

Country	Value
Italy	7.34
Spain	8.33
Netherlands	9.4
Belgium	9.62
Russia	10.24
France	10.98
Austria	11.06
China	12.88
UK	13.24
Singapore	13.27
Germany	13.7
Australia	14.01
Turkey	14.65
Switzerland	14.67
Japan	15.2
Sweden	15.21
Brazil	15.77
Taiwan	16
Hong Kong	16.05
Thailand	16.34
South Africa	17.44
Korea	18.62
Canada	18.86
India	20.06
Mexico	21.69
USA	21.76
Malaysia	23.12
Chile	26.4
Indonesia	29.41
source: http://www.mebanefaber.com/2012/05/24/global-shiller-capes/

How Green is Boston?

This week I am making my travel arrangements for the Academy of Management Meetings in Boston. Whenever I travel to a major city I like to have an idea of how green the city is. The Economist Intelligence Unit in sponsorship with Siemens has created the US and Canada Green City Index. In constructing this index, 27 Canadian and US cities are ranked on categories like CO2 emissions, energy use, land use, buildings, transport, water usage, waste, air pollution and environmental governance. Boston ranks 6 on the Green City Index (higher than the city where I work, Toronto). Boston is the greenest city that the AOM has been to in many years. San Fransisco ranks as the greenest city while Detroit ranks 27 th.

The Green City Index is based on a city's ranking in several categories. Boston's ranking in the categories are: CO2 emissions (11), energy use (2), land use (4), buildings (10), transport (17), water usage (2), waste (15), air pollution (14), and environmental governance (15). Boston does particular well in the categories of energy use, land use and water use. Boston's low carbon dioxide emissions are helped by consuming less energy and using less coal in electricity generation. Boston also has a comprehensive plan for energy conservation initiatives and the Solar Boston project which aims to encourage wide-spread adoption of solar energy. At just 74 gallons of water per person per day, Boston has the second lowest level of water consumption of the cities ranked (New York has the lowest water consumption). Boston is a high density city which gives it a high ranking on the land use scale.

Green buildings, transport and air pollution are areas where Boston could do better. Boston has 6.5 buildings per 100,000 people that are LEED certified. This is about average. Boston has a relatively high rate of non-automobile commuting but the city's public transport options are limited. More public transport in more places would help to improve Boston's transportation ranking. Boston could also improve on recycling, especially the recycling of hazardous material. Boston's low ranking on environmental governance has to do with the fact that there is no coherent action plan for green initiatives but rather a series of advisory plans.

Gasoline Prices Around the World

Bloomberg has put together a nice slideshow of gasoline prices around the world. I have created a table from the data in the slideshow. The data on gasoline prices were collected between April 2 and April 11 of this year.  Premium gasoline was used in order to account for differences in octane. The most expensive gasoline is in Norway ($9.69) while the cheapest gasoline is in Venezuela ($0.09). Canada ranks at #38 ($5.75) below Japan ($7.58) and above the US ($4.19). Compared to other developed economies, gasoline prices in Canada and the US are actually fairly cheap. Bloomberg also calculates something which they call the pain at the pump (the percentage of daily income needed to buy a gallon of gasoline). In Canada, a gallon of gasoline costs just 4% of average daily income. Gasoline consumers in UAE, Kuwait, Saudi Arabia and Venezuela have cheap gasoline and very low pain at the pump. For other countries, the pain at the pump values vary a lot between developed and developing countries.

Rank Country Price per gallon of premium % of average daily income Pain at the pump rank 1 Norway $9.69 3.6 48 2 Denmark $9.37 5.3 42 3 Italy $9.35 9.1 29 3 Netherlands $9.35 6.5 37 5 Greece $9.23 12 23 6 Sweden $8.97 4.8 44 7 Hong Kong $8.89 8.8 31 8 Portugal $8.85 na 21 9 United Kingdom $8.84 7.8 34 10 Belgium $8.82 6.5 37 11 France $8.72 7 35 12 Finland $8.59 6 40 13 Germany $8.56 6.9 36 14 Ireland $8.34 6.1 39 15 Switzerland $7.95 3.7 47 16 Slovakia $7.93 16 19 17 Hungary $7.69 19 11 18 Czech Republic $7.59 13 22 19 Japan $7.58 5.8 41 20 South Korea $7.57 11 26 21 Spain $7.55 8.1 32 22 Slovenia $7.54 10 28 23 Austria $7.45 5.2 43 24 Malta $7.32 12 25 25 Latvia $7.26 21 9 26 Luxembourg $7.24 2.1 51 27 Lithuania $7.24 19 12 28 Estonia $7.05 14 20 29 Poland $7.01 18 15 30 Cyprus $6.97 8 33 31 Bulgaria $6.94 33 5 32 Australia $6.75 3.8 49 33 Singapore $6.70 4.6 45 34 Romania $6.59 25 7 35 Chile $6.54 17 17 36 Brazil $6.41 18 13 37 India $6.06 135 1 38 Canada $5.75 4 46 39 South Africa $5.72 24 8 40 Seychelles $5.53 18 14 41 Argentina $5.44 18 16 42 China $5.31 34 4 43 Thailand $4.96 31 6 44 United States $4.19 3.1 50 45 Indonesia $4.11 40 3 46 Russia $3.71 9.1 29 47 Malaysia $3.49 12 24 48 Mexico $3.20 10 27 49 Iran $2.78 16 18 50 Nigeria $2.33 53 2 51 UAE $1.89 1 53 52 Egypt $1.73 20 10 53 Kuwait $0.88 0.7 54 54 Saudi Arabia $0.61 1.1 52 55 Venezuela $0.09 0.3 55

Low inflation expectations

Latest information from the Cleveland Federal Reserve on inflationary expectations indicates inflation is expected to be below 2% over the next 10 years. Really low inflation combined with even lower nominal interest rates spells negative real interest rates. In other words, fixed income investors are screwed.

Central banks around the world have an incentive to keep interest rates low in order to make it cheaper to service their debt. Massive printing of money to service debt should increase inflation in the long-run (due to the quantity theory of money) but apparently this is not happening. There is lots more room for fiscal stimulus. Go ahead central governments, spend, spend and spend some more.

Failing US clean tech policy

A disturbing new report from the Metropolitan Policy Program at Brookings, shows how US federal support for clean tech is  expected to drop by 75% between 2009 and 2014. This crash scenario is based on the assumption that 62 clean tech support programs currently in place will expire and nothing will replace them. The the American Recovery and Reinvestment Act of 2009 (ARRA) provided a number of initiatives to support clean tech but these initiatives are now coming to an end. A number of additional tax credits and production support policies for clean tech are also now coming to an end. In addition, the boom in natural gas is also having an impact. Natural gas is the marginal fuel source for power generators. With natural gas prices currently between $2  and $3 MMBTUs there is no incentive to invest in large scale renewable projects like wind. For wind projects to be economically viable, natural gas prices need to be around $6 MMBTUs.

Clean tech is a very difficult market space to invest in and make money. The macro drivers of clean tech include climate change, energy security, resource depletion, new technology and green consumers. Government policy can greatly influence these drivers. Climate change seems to be a difficult concept for Washington to address so an energy security argument might be easier. In 2011, US net petroleum imports equaled 8.4 MMbd. Assuming an oil price of $100 per barrel, US net imports totaled $306 billion dollars in 2011. The US Department of Commerce has some interesting charts on how the oil import bill breaks down by household. Using some of this money spent on imported oil to invest in renewable energy seems like a good way to increase US energy security and reduce the dependence on imported oil. The US needs a coherent federal energy policy to address issues like energy security and renewable energy should be part of such policy.