When discussing financing of pending renewable energy projects I often make reference to the crash of 2008 and people give me a funny look. NBBooks over at The European Tribune has summed it up nicely in this recent posting. I've changed the format a bit and taken some small liberties with the original text to make it more readable, then I'll expand upon what it means for renewable energy projects.

This diary is my humble little attempt to let these people know that the crash has already happened. It began in August. I guess they didn't notice, but a number of financial markets have already collapsed.

First(1), of course, there was the derivatives based on sub-prime mortgages. That seems to be about where the common consciousness stops. But before U.S. Secretary Treasury Hank Paulson and Federal Reserve Chairman Ben Bernanke (a.k.a., Captain Carnage) even lifted a finger to try and sort out the sub-prime mortgage mess, they first had to deal with the collapse of the market for (2)Structured Investment Vehicles. Since these two crises began last summer many other financial markets have also collapsed: (3)corporate junk bonds, (4)asset-backed commercial paper, (5)municipal bonds.

This last was saved just last week by New York State Insurance Commissioner Dinallo basically forcing Moodys, S&P and Fitch to give AAA ratings to the monolines insurers. All these markets have pretty much ceased functioning, with not even the banks that created some of this stuff willing to buy their own product. Financial institutions have also been disappearing, especially a number of hedge funds, the most recent being this past week: Peloton, a London-based hedge fund specializing in asset-backed bonds.

So, what does this mean for Freedom Fertilizer's planned fifty to one hundred million dollar plant construction in either Graettinger or Superior, Iowa?

Not all that much directly, and I hope Iowans have been wise enough to avoid most of the indirect affects as well.

Unlike the speculative bubble in the housing market and all of the nonsense that has been spawned with borrowed money backed by these so called "assets", Freedom Fertilizer's project is based on commodities, and these are happy times for those who either hold or produce commodities.

There is a bit of news in the March 5th Debt Rattle over at The Automatic Earth that, while being quite ugly on a global scale, is very good for those of here involved in agriculture and energy, as long as we make the right moves right now.

If you read this what it is saying as that the dollar is going to be worth less (and perhaps worthless) at the rate things are going, but what people require will continue to hold its value. Everyone still needs to eat and this is a good thing for us.

We have some significant exposure on the energy front. The ammonia and associated derivatives used to fertilize the corn crop depend on natural gas and the fuel for harvesting is entirely crude oil based at this point. We need to fix those two things.

Ammonia is $800/ton right now and people are amazed at the high price. That will only get worse, as this recent study by Jon Freise indicates; Canada will run out of recoverable natural gas within the next seven years.

Although not immediately obvious, this has grim implications for our diesel supply, too. Right now the only reason Canada can export three million barrels of oil a day is that they've got the natural gas required to heat a Florida sized chunk of the province of Alberta up to five hundred degrees to get the tar out of the sand. Couple this fact with the impending closure of the million and a half barrel a day Cantarell field in Mexico and one can see where this is headed. There will come a day just like we had during world war II, where fuel will be rationed with critical industries coming first ... but what happens between now and then? We can't wait for the federal government to fix this, no, not even until next January. The time to start is now.