America’s energy portfolio is going to become more diversified in the future, whether the federal government provides additional subsidies or not. The big issue is how these many technologies, some of which are commercially untested, are going to get financed.
Jesse Eisinger in the Wall Street Journal notes that the hunt for alternative energy sources has attracted attention on Wall Street. He highlights Energy Conversion Devices (NASDAQ:ENER) is the poster child of this hype:
Alternative energy follows countless futuristic fads, including gene therapy, e-tailing and nanotechnology. With energy prices rocketing, it was inevitable that Wall Street would latch onto companies offering technological solutions to our country’s oil “addiction,” as the president diagnosed the symptoms in his annual speech Jan. 31. These investors’ hearts warmed as Mr. Bush endorsed increased government spending on emerging energy alternatives.
Claudia H. Deutsch in the New York Times notes the increased attention being paid towards GE’s alternative energy businesses. With current technology and energy prices only the windmill turbine business seems to be self-sustaining at the moment. GE, and other Wall Street firms, are interested in financing various alternative energy projects.
Speaking of alternative energy sources, oil sands has become big news with a segment on 60 Minutes. Bill Cara notes that there is a new oil sands sector fund being launched in Canada. While this does not represent direct investment in the oil sands it does provide a pool of liquidity available to purchase follow-on financings from those entities.
We have been discussing the prospects for ethanol to take market share from petroleum products. One of the attractions of E85 was that it was substantially cheaper than gas on a per gallon basis. Now James. R. Healey in the USA Today reports that at some stations E85 is selling at a higher price than gas, even though it has less energy per gallon. Apparently this is being driven by increased demand for ethanol as a substitute for MTBE. Until the supply of ethanol can drive down the price of E85 to a competitive level.