Get ready to make some notes on which energy investments should do well in 2009 and beyond based on what leading experts forecast in 2008 – predictions that have gone largely unnoticed by the rest of the media in the crush of the global credit crisis.
#1 – President-elect Obama, in a cable TV interview on MSNBC on the eve of his election, saying,
One of, I think, the most important infrastructure projects that we need is a whole new electricity grid. Because if we’re going to be serious about renewable energy, I want to be able to get wind power from North Dakota to population centers, like Chicago. And we’re going to have to have a smart grid if we want to use plug-in hybrids, then we want to be able to have ordinary consumers sell back the electricity that’s generated from those car batteries, back into the grid. That can create five million new jobs, just in new energy.
Any longtime energy investor reading this statement can only say, “Wow!” In a matter of seconds, Obama has referenced two multi-billion-dollar investment opportunities that he says will be at the top of his list: energy “storage” and plug-in hybrid electric vehicles (PHEVs).
The first is what will be needed to connect solar, wind and other green power sources into a grid whose stability already is less than desirable. Technologies competing for dominance in power grid energy storage applications include: lead-acid batteries, lithium-ion batteries, flywheels and ultracapacitors. Based on Obama’s statement, companies such as Beacon Power (BCON) (flywheels), Enersys (NYSE:ENS) (lead-acid batteries), Ener1 (NASDAQ:HEV) (li-ion batteries) and Maxwell Technologies (NASDAQ:MXWL) (ultracaps) all could see their fortunes improve.
At the same time, it’s clear the US President-elect wants to push for more wind and solar development, which bodes well generally for both of these large energy sub-sectors.
Still, the “Wow!” factor in Obama’s statement comes from his understanding and recognition of the importance of so-called “vehicle-to-grid” technology (V-2-G). That’s stunning because even many clean tech experts have only a dim understanding of V-2-G.
V-2-G requires having a “smart” (meaning computer-controlled) power grid capable of two-way energy delivery. In Obama’s mind, the grid won’t just be capable of supplying the electric fuel for PHEVs. It will also be capable of drawing the power stored in the batteries of millions of PHEVs back into the grid, thereby providing an on-demand back-up power source that not only will stabilize the grid and prevent blackouts, but will also serve to enhance America’s national security by being a completely decentralized source of power.
Thus has Obama signaled his intention to fully support electrified transportation, which could be a boom for some of the same battery manufacturers listed above, as well as for a bevy of car manufacturers and computer software developers such as IBM (NYSE:IBM).
#2 – Merrill Lynch forecast the “clean” energy revolution will be as big as the Industrial Revolution as the world tries to cope simultaneously with global warming, peak oil and energy insecurity.
“History shows that technology revolutions occur about every 50 years. We believe clean tech is at the beginning of a high-growth period, much like computing was in the early 1970s,” Merrill’s clean-tech strategist, Steven Milunovich, reportedly said, adding that he expects “profound changes” in the energy, utility and automotive industries.
That’s pretty much the entire economy (both businesses and consumers) that Merrill expects to be profoundly changed by the clean energy revolution. Calling it also a profound investment opportunity, Merrill forecast the world will start to see the effects of this new revolution as early as 2010, which suggests that 2009 will be the year smart investors position their portfolios in anticipation of what Merrill also called a new “golden age” of technology.
Merrill believes the clean tech revolution will be led by solar power. It further believes that electrified vehicles will revolutionize transportation and that, because of reliability concerns, on-site generation will compete with centrally-dispatched power from mammoth power plants. The latter suggests a bright future for things like Honda’s (NYSE:HMC) home fuel cell system, while the former suggests a bright future for the mostly Japanese automakers taking the lead on plug-in hybrid electric vehicles (PHEVs).
#3 – Toyota’s (NYSE:TM) coordinator for alternatively fueled vehicles forecast there could be a “liquid peak” within a decade, and the company itself warned in a report that with 1.5 billion vehicles expected on global highways by 2020, 600 million more than today, there could be “supply shortages and resource exhaustion.”
By signaling its concern over “peak oil,” Toyota, which has long been at the forefront of technological change in transportation, effectively endorsed the new generation of hybrids, plug-in hybrids and other alternatively-fueled vehicles. That should cause investors to look even closer at the technological leaders in “mild” hybrid technology, lithium-ion battery technology, and more.
Also, with the U.S. having only a handful of entrants in this race to develop the next generation of fuel-efficient transportation, American investors may need to refocus on the leading Asian and European contenders.
#4 – Dan Reicher, director of climate and energy initiatives for Google’s (NASDAQ:GOOG) foundation, forecast that “Enhanced Geothermal System” (EGS) technology could be the “killer app” of the energy world. Reicher, whose stature in the “clean” energy world put him on the short list to be energy secretary in the Obama administration, said EGS “has the potential to deliver vast quantities of power 24/7 and be captured nearly anywhere in the world. And it would be a perfect complement to intermittent sources like solar and wind.”
EGS, sometimes called heat-mining, utilizes technology that allows for the capture of the Earth’s own heat when there isn’t a naturally-occurring water source.
Google is backing its forecast with funding for two small private companies, Alta Rock Energy and Potter Drilling. Large publicly-held companies should benefit significantly if Reicher is correct, among them Ormat Technologies (NYSE:ORA) and Australia’s Geodynamics (OTCPK:GDYMF).
#5 – The head of strategy development and execution for Boeing Co.'s (NYSE:BA) biofuels program forecast that commercial jets will be flying on biofuel in three to five years, far less time than generally believed.
The Boeing official, Darrin Morgan, said sunflowers and jatropha are closest to being certified, with algae also holding great promise. In an interview with Wired.com, he noted that these biofuels, which will be blended with regular jet fuel, won’t require any engine modifications.
This is tremendous news for the airline industry, which almost went under in 2008 as a result of high fuel prices. With most experts expecting a return to $100+ oil within a few years (as the economy improves), airlines may now be able to avoid further desperate times as they increasingly rely on lower-cost bio-based fuel. In addition, by displacing jet fuel with cleaner-burning biofuel, airlines may not have to pay as much to offset their carbon dioxide emissions in the global cap-and-trade market expected to be up and running in three to five years.
This could also be great news for a company like Honeywell (NYSE:HON), whose UOP unit is in the forefront of jatropha-based fuel development. It could also be great news for major sunflower seed producers like DuPont (NYSE:DD). And it clearly suggests that the group of generally small algae development companies in the world should soon have a ready market.
Disclosure: no positions