by Jeff Siegel
Last Friday, I had a conversation with an old friend of mine who now lives in China. A life-long environmentalist and diehard capitalist, she has made a ton of dough working as a consultant on alternative energy projects all over the world. From wind farms in the UK to infrastructure development in Beijing, she has never made it a secret that her most lucrative deals always come from places where policy support for alternative energy is the strongest. And those places are where the government welcomes alternative energy funding, instead of chasing it away by providing limited or no long-term visibility.
This is why she has spent very little time in the United States over the past five years. But based on our conversation last week, she's surprisingly optimistic about a potential return to her home state of Ohio. Apparently, she sees some real potential in the coming energy bill.
Unfortunately, I'm less enthusiastic. It's just hard for me to believe that anything meaningful can happen this close to an election. You know how politicians are... Few ever have the cojones to take a stand and do what's right for the country — and not their contributors — during non-election years. The level of complacency and fake smiles just kicks into overdrive during an election year.
That being said, my refreshingly optimistic friend did make a very good point that I want to share with you today. Because if she's right, then the result of this bill will dictate where we place our bets.
Just another energy tax?
The thorn in the side of this energy bill has always been the issue of putting a price on emissions. Supporters say that it is necessary to rein in those often ignored external costs that keep coal-fired power artificially low. Opponents argue that putting a price on emissions would cause the price of power to skyrocket and hurt taxpayers. Although if we truly value a free market, then I would argue that all costs related to power production must be figured into the equation, and not externalized.
As well, tax payers are already getting fleeced on the coal deal, since we've been subsidizing the stuff for decades. Why does an industry that is established and profitable need continued subsidies?
Nonetheless, the two sides of this debate are not likely to hold hands anytime soon. But there's a lot of money sitting on the sidelines right now; money that the utilities are ready to invest into cleaner energy alternatives. And they can't move until Washington gets off its complacent ass and actually implements some kind of carbon limit legislation.
Look, whether you think climate change is real or not, at some point there will be limits on CO2 emissions. That's a fact, and any investor who can't grasp this reality because he or she is too busy bashing Al Gore or reciting Rush Limbaugh quotes is going to miss out on a lot of money.
The utilities know that this is coming, and they're actually eager to get moving on this very necessary transition.
Now we know that there's no chance of an economy-wide cap and trade with this bill. It's just not going to happen.
But in an effort to get something passed, many are expecting to see a bill that calls for putting CO2 limits on utilities first, then moving on to other industries at a later date. And quite a few utilities are actually supporting this idea. In fact Duke Energy's (NYSE: DUK) Jim Rogers said that they're willing to start early, as long as an economy-wide limit is eventually integrated.
Not too much to ask, considering that the utilities actually emit less than half (about 40 percent) of U.S. greenhouse gas emissions. There are a number of other industries that make up the other 60 percent.
If both sides of the aisle can actually come together on this compromise, expect to see a flood of backed up capital flow into solar, transmission and energy efficiency and conservation technology... Because the utilities will finally have the green light they need to move forward.
Some of the companies we see as being able to benefit include:
First Solar (NASDAQ: FSLR)
EnerNOC (NASDAQ: ENOC)
Comverge (NASDAQ: COMV)
Itron (NASDAQ: ITRI)
ITC Holdings Corp. (NYSE: ITC)
Of course, while my optimistic friend believes there's a pretty good chance this compromise will lead to actual legislation, I'm reminded every day by the dishonest rhetoric in the media that this is far from a done deal...
Many politicians are still screaming about how this would be nothing more than a national energy tax. Of course, they say nothing about the current “national energy tax” that goes to support the welfare scam that rewards King Coal and Big Oil with fat subsidies while quietly swindling tax payers...
No — we don't hear about those taxpayer-funded subsidies because that would force the nation to re-evaluate the price we're really paying for energy. I don't suspect anyone in Washington is going to call attention to our already subsidized fossil fuel machine. But I do believe that at some point, there will be a price on carbon.
When that happens, the nation's utilities are going to ignite some major movement for a handful of Green Chip stocks. And we'll be there to reap the rewards.
Disclosure: No positions