Why Alternative Energy Can't Be Ignored 25 comments
an article to
-
Font Size:
-
Print
- TweetThis
Louis Basenese is one of the smartest investment analysts I know, and a good friend of mine to boot. And most of the time I agree with his research - and his conclusions.
Just not this time.
You see, this past Tuesday, his Investment U article caught my attention. In case you missed it, it was written about green energy. In it, Louis makes an argument for a “green energy super-bubble” that could burst in as little as two or three years, leaving unwary alternative energy investors in the lurch.
In his article, he cites four conditions that exist that make alternative energy ripe for a bubble. Those conditions may indeed be forming, but in and of themselves won’t cause a “speculative bubble.” In this case, there’s definitely more to the story.
The Defense of Alternative Energy & Green Investing
Louis: “The legislation is in place, and more is on the way.”
You’ll get no argument from me that Bush’s foray into increased ethanol production was misguided at best. But unlike ethanol, solar, wind and geothermal tax credits have been the catalysts that have energized those respective industries.
Improvements in technology have resulted in generation costs on par with - and in some cases, below - conventional fossil fuel sources. And with regard to solar in particular, costs per watt are on track to drop another 50% in the next few years. And in spite of the lower costs, industry margins will be in the 35% to 50% range, three times what they are today. That’s a recipe for increased earnings if I ever saw one.
Louis: “Money is already pouring into the sector.”
The $200 billion that Louis said flowed into the sector in the last two years is about right for a capital-intensive business like alternative energy. If it weren’t flowing into alternative energy development and deployment, where else in the energy sector would it go?
To pay for higher oil, for one, but perhaps it’s easier to describe where it won’t be going:
- No one wants a fossil fuel plant in their backyard (few are even planned, let alone being built), and you can forget about any new nuclear power plants here in the United States.
- Only a few are even in the permit stage (a 10-year process in and of itself), construction can take 10 to 15 years, and cost $15 to $20 billion. In June 2008, Moody’s estimated that the cost of power produced by a nuclear plant might possibly exceed $7 per watt, 10 times that of solar’s $0.70 per watt. And then there’s the spent fuel issue, decommissioning, etc.
Plenty of Room to Up Spending on Alternative Energy
Given that the United States alone spends over $500 billion every year on foreign oil, there’s plenty of room to up the spending on alternative energies like wind power.
Besides, we don’t really have a choice; cheap energy’s the key ingredient for economic growth. The problem with coal, oil and natural gas is that they are all finite resources, and we’ve already used all the best deposits (those with the highest energy content). Combine that with oil prices that will likely be closer to $100 a barrel by the end of the year, reigniting interest in alternatives.
Louis: “Tough credit conditions actually encourage more speculation.”
I’d argue that it’s really investment we’re talking about, not speculation. Because of the tax credits mentioned earlier, many start-ups already exist - particularly in the solar sector - where no less than 143 companies are currently playing in the thin-film segment of the industry.
There’s no question that they won’t all survive. But those that do will have viable, long-term business supplying the world with much-needed alternatives to fossil fuels.
Louis: “Green is the new black.”
Here I whole-heartedly agree, but for a different reason…
A Paradigm Shift Is Underway In Alternative Energy
There’s a paradigm shift underway in the alternative energy sector. Fossil fuels are on their way out and green is on the way in. It’s going to be a 20- to -30-year process, and that’s why it’s destined to be such a great opportunity for investors.
It’s not just a “U.S. social responsibility” thing, either. In fact, it’s just the opposite. Our alternative energy roadmap is far behind those of many other nations. Take Portugal, for instance, where over 60% of their energy comes from renewable sources. Their goal? 100%. China and Germany also have aggressive alternative energy generation plans underway.
And because of all the government tax incentives dangled in front of the myriad companies, cost-effective solar panels and wind generators are already in use, generating power that produces no greenhouse gas, and more importantly, don’t use a drop of oil when running.
Here’s the bottom-line: The global need for cheap energy is so monumental, alternative energy is destined to remain a target-rich environment for many years to come. Will some companies be better investments than others? Of course… just like they are in any other sector.
But a bursting bubble in two to three years? I don’t believe it. Actually, a mini one burst last year when oil dropped from $147 a barrel to where it is today, driving many solar, wind and geothermal stocks down as much as 80%. The valuations that these companies are sporting now are, in many cases, as low as they’ve ever been.
And that has helped to set up what could be one of the best sectors to invest in moving forward… for decades to come.
One thing you can be sure of: Both Louis and I will be watching it all unfold with an eye (or two, in this case) towards providing you with some great ideas for investing… and maybe for a few bragging rights.
Related Articles
|
-
The Seeking Alpha 100
See allThe top 100 stock
market authors
selected for publication
Seeking Alpha 100 » -
Fastest Climbers
Authors with the largestSee all
increase in followers
in the last 7 days
Fastest Climbers » -
Top Commenters
Top commenters,See all
as ranked by their peers
Top Commenters » -
Top Instabloggers
The 100 most active
Instabloggers.-
1
David Fry
-
2
TraderMark
-
3
Don Dion
-
4
Cliff Wachtel
-
5
Mike Havrilla
Top Instabloggers » -
1
-
Top StockTalkers
TopSee all
StockTalkers.
Top StockTalkers »
Got a second call from ABEC [a beck] on Wednesday March 10, 2009. This time we registered with Matt.
ACCCE combines the assets and missions of the Center for Energy and Economic Development (CEED) and Americans for Balanced Energy Choices (ABEC). The change in our name more accurately reflects who we are and our belief that technology will help ensure that coal remains a fuel of the future when it comes to meeting America's growing energy needs.
www.americaspower.org/
"This is going to be an extraordinarily challenging year, and there's no question there's going to be a shakeout," said Joel Makower, one of the report's authors and a co-founder of Clean Edge. "It's really unfortunate timing, just at the point when clean energy has been reaching critical mass." ..."
www.sfgate.com/cgi-bin...
fischer-tropsch synthesis and bergius hydrogenation helped germany fight longer than otherwise, but output was limited compared to need and could not make up for the loss of the romanian oilfields to the russian army.
> jack
As for nuclear, they say that a nuclear renaissance is underway or almost underway. I have a prediction if this is true. It will be possible to build an optimal nuclear plant in four years or less, it will have a 'life' of about 70 years, and where cost is concerned I expect $1500/Kwh. And please note, we are talking about reliable power.
Pink Sheets: Linc Energy, underground Coal-Gas-Diesel Tech.,LNCGY
Due Diligence please.
But if you take the huge amount of oil we use for personal transportation that leaves allot left over for commercial transportation and I hate to break it to you but if you take the 35%+ of oil we use for that off the market we have a HUGE supply glut. Regardless of your misguided "peak" theories.
This is not supply and demand, it is manipulation in the commodities market, call future buying, plenty of oil. If I tell you the sky is falling enough, somebody will eventually look up to see. We need to close all the loopholes in the commodities market.
Americans, if you’re surprised at the current world economy, don’t be. We live in a global economy. What affects the whole world affects us as well. 13 OPEC countries and 5 major oil companies have their finger on the pulse of the worlds economy. It is called a monopoly, we need to restructure the commodities market regulations ASAP. Call, write, email and fax your representative and tell them today. Keep your eye on the gas pump, they have sucked the living life out of the whole worlds economy and will do it again giving the first opportunity. We need TERM LIMITS in Congress, no exceptions. 85 % of our government representatives are millionaires, they do not see the economy through the same eyes as most Americans do.
We, as a species, should be rejoicing at the fact that we have it within our grasp to free ourselves from those cartels and countries rich in fossil fuel sources. This is so because to frequently these entities use their control of energy sources to attempt to control the political discourse and commerce with threats and bribery.
This type of extortion will only increase in the future as the supply of fossil fuels diminish. This will of course lead to more human suffering in the form of energy shortages and an increase in wars for control.
As long as the human species continues to grow at over 100 million new persons to house, feed, and clothe each year, the need for energy will remain insatiable.
Alternative energy sources are not a fad. They are a critical necessity going forward. Encouraging the continued developement and utilization of this energy source need not even add greatly to our current energy expenditures. All that need be done is to redirect some of the current monies being given to oil and coal corporations. Every dollar spent in this fashsion will be returned at least tenfold not to far into the future. Remember the need of human beings for energy is insatiable. The need for safe renewable sources is critical for the future of our planet and, thus, ourselves.
So I guess, according to your view, they should continue producing because if they stop, commodity prices will go up. It would be Manipulation otherwise. Let them go bankrupt.
Or maybe you believe, GM should continue building more Hummers even if they can't sell them.
Its their oil, you don't want it, don't buy it. Their economies should suffer because of mistakes we made?
Citco Gas stations, 100% state owned Venezuelan/Chavez. Stop buying their products.
Get another pulpit. IMHO
> I hate
> to break it to you but if you take the 35%+ of oil we use for that
> off the market we have a HUGE supply glut. Regardless of your misguided
> "peak" theories.
I hate to break it you but there is a phenomenal difference between a production glut and a reserve supply glut.
If you are future-pricing something, the longer the timeframe, the more the the reserve is a factor in the equation.
It's the oilmen talking about "peak oil". It's their phrase.
Did someone here mention hydrogen? Could you fly to the Sun and get me some?
I'll wait.
Meanwhile, conventional supplies like oil and coal will still dominate for decades. The reason to me is three fold:
(1) The Capitalist had their investments firmly tied down in the exploration, mining, and processing infrastructures, which are highly amortized and could not easily be phased out in quick time;
(2) Politics - Big Oil is still holding the big stick of campaign financing over the politicians' head.
(3) Unproven though plausible - conspiracy theory has it that Big Business wants to trade oil wealth from the Middle East with Big Goods and Services that mean profits.
germany spain and italy already see the benefits of alt energy. they want to limit the pollution of coal. just the waste from scrubbing out the fly ash is creating huge waste dump problems. ever see a fly ash pond. it is gross. we ignore this becasue of the vast space
available in this country, not so in europe.