Opportunities In Renewable Energy

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 |  Includes: FAN, FSLR, SIEGY, TAN
by: Dustin Moore

The desire for clean air and water has been a concern of mankind for millennia. But as the world becomes increasingly industrial and population explodes, governments and businesses are looking for ways to preserve our environment.

Many companies are focused on providing clean energy through new and renewable technologies such wind and solar power. These businesses were sizzling prior to the recent recession, as high energy prices and floods of government subsidies supported the budding industry.

FPL Group, like many other companies, has invested millions in these technologies. However, a closer look into the industry shows signs of trouble. In fact, two representative ETFs (NYSEARCA:TAN) and (NYSEARCA:FAN), which track the solar and wind industries respectively, have fared quite poorly. If fact, the prices for both of these investment vehicles plummeted during the recession and never really recovered. First Solar (NASDAQ:FSLR), a bellwether of sorts for the solar industry, has shed over 80% of its value since its highs 4 years ago. So what gives?

The industry has been ravished by, among many factors, the cost of energy remaining relatively low, smothering demand for alternatives. Furthermore, debt ridden Uncle Sam, along with many governments around the world, has slashed subsidies and R&D spending for the industry.

As companies continue to spend millions in developing these technologies, traditional nonrenewable sources such as coal remain very abundant and significantly cheaper. The changing economics from the weaker economy have helped these sources attractive from a cost perspective.

But regardless of favorable economics, one thing has not changed: These energy sources are not clean. Coal, oil, and even natural gas are damaging to the environment. Regardless of the price, they can be unhealthy and unpopular by the constituents they power.

But there are a host of companies that are taking a different approach to green energy and a clean environment. Instead of developing and introducing technology solutions that fundamentally shift our energy sources, these businesses simply enable traditional sources, such as coal, to be cleaner, or at least less dirty.

As most know, when coal is burned it releases sulfur, which can cause acid rain. Coal is also blamed as the largest contributor to carbon dioxide, a greenhouse gas. But these new kinds of clean technologies solve one of the biggest problems with coal by mitigating these adverse effects.

Some companies, like ThermoEnergy, are taking green technology a step further. "First there was coal; then there were scrubbers," says Cary Bullock, ThermoEnergy CEO, "We're in the next wave of coal power."

In 2008, Siemens (SI), the German conglomerate, got the ball rolling by constructing the first clean coal plant in the world. Since then, the idea has continued to gain traction. ThermoEnergy possess a technology that gets rid of the smoke stack, all while enabling coal-fired plant to emit an impressive zero emissions.

As the political pressure builds and the regulations and fines become stricter, companies utilizing traditional sources of energy must adapt. New clean technologies that allow for lower emissions, while still enabling power to be created inexpensively, may be an attractive business model given the current macroeconomic situation.

But energy production is not the only industry that government regulatory agencies have their sights on. Ever since the polluted Cuyahoga River infamously caught fire in 1969, the US government has been at war with water pollution.

In fact, government regulations have only made the clean technology business model more attractive. For example, it was hefty environmental fines that led New York City to sign a multimillion-dollar agreement with ThermoEngery to utilize its ammonia recovery system a wastewater treatment plant.

In many ways, to Bullock, it is the pollutants themselves that provide a business opportunity. ThermoEnergy, for example, is able to recover materials in a way that they can be sold, such as use for fertilizer. In this way, clean technology business can on several mega markets like energy, water, and fertilizer, all while removing harmful pollutants from the air and water.

With many renewable technologies yet to prove their cost effectiveness, the green energy industry is still in its birth. Traditional energy sources like coal and natural gas will continue to dominate in the near term. But with shifting politics and regulatory rules, these energy sources will need to find a way to be clean. This is where clean technology companies can help make this a reality and where savvy investors may find profit.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.