An Academic Discusses Ethanol Stocks

Professor Daniel Kammen, the founding director of The Renewable and Appropriate Energy Laboratory at Berkeley, was recently interviewed on 60 Minutes as part of its ethanol segment. Here's a brief follow-up interview by Konrad Imielinski:

Konrad Imielinski: Which technology has the biggest chance of replacing oil eventually? Some say that ethanol is a short term solution and that hydrogen has true long term potential. What is your view of this?

Professor Kammen: No! Corn-Ethanol may be a short-term solution, ie. a transitional mechanism to get us to ethanol, but since corn-based ethanol is not a winner on a greenhouse gas basis while cellulosic ethanol is, that is where we want to end up. A cellulosic-ethanol industry could, we estimate, make up 1/3 – 1/2 of our total gasoline use over time, and more if plug-in hybrids running on ethanol are part of the mix. We have details on this online.

KI: What is your prediction five years from now: will E85 have a significant portion of the fuel market in the US? If so, how much?

PK: I’d say in 2-4 years E85 will be 15% of US transport fuels.

KI: What is your favorite alternative energy company? What do you make of the current alternative energy bubble?

PK: Not one single company, but the diversity is key, and is needed. Some Winners: Scottish Power plc (ADR: SPI), a traditional company that does greenhouse gas accounting for its deals, and Horizon Wind (previously Zilkha, now acquired by Goldman Sachs). See, too, all the companies in the the WilderHill Clean Energy Index.

[Editor's note: PowerShares Capital Management offers an ETF that tracks the WilderHill Clean Energy Index, namely the PowerShares WilderHill Clean Energy Portfolio (PBW). See also the current list of the constituents of the ETF.]

KI: Will major oil companies develop alternative energy programs to compete with (and maybe squash) companies like Pacific Ethanol Inc. (Nasdaq: PEIX) or Xethanol Corp. (XNL)?

PK: They should, but so far are not moving very fast. They have the capital, the expertise, and the market!

KI: What do you think about Veridium Corporation (VRDM)?

PK: What is that?