The future must entail clean, renewable energy. Drilling for oil isn't sustainable and is increasingly getting dangerous as companies move offshore. Natural gas prolongs the inevitable and requires significant infrastructure changes. Nuclear energy has always been a double-edged sword from both a political and environmental standpoint. Coal remains a cigarette in the mouth of the world. As a result, there are only a few alternatives, all of which have their advantages and their setbacks. Solar energy, Biofuels, Geothermal energy, Hydropower, and Wind energy stand as the known core alternatives to the hydrocarbon-based energy standard we have today.
Investors of today may be disappointed by much of their choices when it comes to direct investment in sustainable energy. The most stable and profitable companies remain the conglomerates who derive a small portion of their profits from such sources. As for the direct players, nearly all have been victim to the latest struggles of their respective industries. Yet in each sector, there remain viable direct investments that prospective investors may wish to look into.
Solar Power. The solar industry has practically collapsed under the weight of falling subsidies and inventory dumping. The ongoing European Debt crisis casted a shadow of uncertainty in the largest market for solar. Yet renewed hope came in the form of Warren Buffett's investment into two utility-scale solar projects supplied by First Solar (NASDAQ:FSLR). Falling solar panel prices also bode well for consumers as widespread acceptance and increasing affordability have increased the industry's demand and long-term future. First Solar remains one of the few viable investments in this sector, with its industry-leading margins that have kept the company profitable throughout the crisis.
Biofuels. The industry is trying to shake off its negative connotation to unsustainable ethanol in light of innovative and proven second generation technology. The struggle remains to be the ability to raise capital and public acceptance in order to bring online production capacity to work on a commercial scale. One of the bright shining lights in this industry remains Solazyme (SZYM), which utilizes algae-based technology to convert non-food sources into renewable oil equivalents, chemicals, food and even cosmetics. Out of companies that provide sustainable ethanol, investors may want to consider Cosan (NYSE:CZZ), a Brazilian-based sugar company with leading ethanol production capacity and distribution capabilities. Especially as American ethanol subsidies have come to an end, Brazilian-based ethanol companies may continue to outshine their ethanol counterparts in America with access to cheaper input materials.
Geothermal Energy. Geothermal is practically non-existent from the public trading realm and is much smaller in size. Yet it also remains one of the more stable prospects. One of the most direct plays on the industry remains Ormat Technologies (NYSE:ORA). The company was founded 1965 and remains the only vertically integrated provider of geothermal and recovered energy-based equipment.
Hydropower. Another stable industry, hydropower companies tend be utility companies governed by municipalities in light of the high capital expenditures necessary to build a dam. Brazil remains one of the greatest developers of hydropower with its vast river resources, abundant rains, and lack of alternatives when it comes to energy sources. Centrais Electricas Brasileiras (NYSE:EBR), more commonly known as Electrobras, operates 29 hydroelectric plants throughout Brazil. The company remains diversified into thermal, coal and oil power generation units, however, and therefore is a far stretch from being a pure play on hydropower.
Wind Energy. The wind industry has been dominated by the Chinese market, which dethroned the United States in 2010 as the largest wind power installer. Yet publicly traded Chinese companies in America came under increased scrutiny in early 2011 that resulted in a lack of viable wind investments. The most viable investments may continue to be General Electric (NYSE:GE) or Siemens (SI), neither of which are pure plays on the industry. American Superconductor Corp (NASDAQ:AMSC) would have been a solid company to consider had the company not been victimized by China's Sinovel through corporate espionage. One of the more direct plays to consider is China Ming Yang Power Group (NYSE:MY), which IPO'd on the NYSE in 2010, and stands as the largest non-state owned wind turbine manufacturer in China. The company has encountered rising expenses and difficulties including weather that interrupted installations. Yet management has initiated a share repurchase program for $50 million, which is impressive for a company currently trading with a market capitalization of $359 million as of January 23, 2012.
Disclosure: I am long FSLR, SZYM.