Eye on the Market | November 21, 2011 J.P Morgan Topic: The quixotic search for energy solutions sea fields recently discovered off the coast of Brazil. We have discussed these projects before (EoTM September 2009). The sub-salt fields in Brazil lay 7 kilometers below the surface of the ocean, beneath a thick salt canopy in the Lower Tertiary region. Oil extraction can be quite complicated due to the low permeability and porosity of the salt canopy, and tar pockets. Our investments in this region are linked to providing services, rather than owning exploration and production assets themselves. Overall, our experience in conventional energy investments has generally been positive. Renewable energy investments. Our experience with renewable energy investing has much more mixed, for many of the reasons outlined in this paper. Some wind projects have worked well, while others (in the UK and in upstate New York) have not, mostly a function of less windy conditions than project managers anticipated. As with conventional energy, some of the better wind projects are related to providing services (constructing offshore wind farms, development for purposes of sale), rather than taking ongoing operating risk. Weather played a negative role as well: higher than expected precipitation in Brazil negatively affected our investments in sugar cane ethanol. Solar projects are on track (utility-scale projects in the US and Europe, and a company providing distributed solar solutions to small business), although both are highly dependent on continued subsidies. Natural gas discoveries have effectively raised the efficiency hurdle rate for renewable projects, and fiscal problems in the West may reduce the subsidies that underpin many renewable projects and valuations. Michael Cembalest Chief Investment Officer Notes Vaclav Smil is a Distinguished Professor in the Faculty of Environment at the University of Manitoba in Winnipeg and a Fellow of the Royal Society of Canada. His interdiscipl