Jeff Siegel's  Instablog

"With a long track record for building some of the world's biggest wind farms, the U.S. is an ideal target for foreign alternative energy investment."

I was pretty bummed out this morning after hearing that T. Boone Pickens would be cancelling his 4 GW wind farm project. Not so much because that beautiful 4 GW wind farm won't be built in Sweetwater, TX – but because this little piece of news is likely to serve as an excellent opportunity for renewable energy naysayers to leave a fresh trail of misinformation about the wind energy industry.

It's already plastered all over message boards and blogs.

Here are a few comments that I found on one particularly hostile message board...

“Why did anyone believe this wind farm would ever get built? Wind energy is a scam. It's just another reason for big government to make more money off the backs of taxpayers.”

“T. Boone Pickens is only trying to make money. He realized that he couldn't make money from a stupid wind farm that nobody wants anyway, so he walked away. When are people in this country going to wake up and realize that coal is whats best for Americans. It's cheap and we have 500 years of it. Time to silence the crazy treehuggers that are bankrupting this country.”

“LOL! What a joke. Drill Baby Drill!!!”

We know why these folks are spouting off. They simply have no problem furthering our reliance on fossil fuels (which in some respects, could be perceived as treasonous). Environmental concerns are laughable to them (because most have absolutely no idea that natural capital can no longer be liquidated without fiscal consequences) and quite a few still believe that they'll be labeled as liberals if they embrace renewable energy integration. I guess they didn't get the memo about how supporting the integration of renewable energy is probably one of the most patriotic things you can do.

Regardless, there seems to be a lot of speculation about why Pickens cancelled the 4 GW farm, and is now restructuring his wind energy plans. But it is likely that the main reason is transmission.

In 2011, 687 GE wind turbines are scheduled to be delivered. But the necessary transmission lines being built to move all that wind power won't be ready until 2013. Bottom line: He can't have $2 billion dollars worth of turbines sitting around for two years while transmission is still being built. Therefore, Pickens is looking to build three or four smaller wind farms elsewhere.

Truth is, this is not an issue with wind energy. It's an issue with infrastructure. And much of the necessary infrastructure upgrades are being planned and built right now.

You see, transmission doesn't go up like shopping malls. These are huge, capital-intensive projects. But don't let the fossil fools use this as an opportunity to further their campaigns of misinformation about renewable energy integration. These upgrades and new developments ARE happening, primarily because our current infrastructure is crumbling, and it's in desperate need of modernization. Of course, those billions (that's right, billions...with a “B”) in stimulus funds are going to enable this massive undertaking too. These upgrades will not only help us move all that new renewable power to the grid, but they'll also enable a more efficient utilization of all the power we generate – both renewable and non-renewable.

Of course, as a renewable energy advocate and investor, I'm primarily focused on renewables. And the fact is, across the nation, new transmission is being built in an effort to facilitate new wind energy projects. Sure, the recession has slowed development. But the recession has slowed development of coal, nuclear and oil projects too. Nothing has been spared. But when the smoke clears, it will primarily be renewable energy projects that get back on track the fastest.

Truth is, hardly anyone wants to touch a coal project these days, even if it is intended to be a mythical “clean coal” project. And while I believe it's possible that we will see some future nuclear development, issues with NIMBYism (Not In My Backyard), waste disposal and extremely high capital costs will make those projects a lot more difficult to get off the ground, compared to new wind farms, solar fields and geothermal power plants.

So yes, Mr. Pickens' announcement is a setback for the wind industry. But it won't stop the momentum that will continue to allow wind, as well as all other renewables to become a much larger part of our overall energy mix.

And investors who are forward-thinking enough to realize that fossil fuel depletion and climate change initiatives will dictate our future energy production, should benefit handsomely by going long on infrastructure and smart grid plays. Companies like Itron (NASDAQ:ITRI), ABB (NYSE:ABB) and American Superconductor (NASDAQ:AMSC). And of course, the solid renewable energy plays, like First Solar (NASDAQ:FSLR), SunPower Corporation (NASDAQ:SPWRA) and Ormat Technologies (NYSE:ORA) – just to name a few.

That being said, overall market conditions will continue to trump sector potential. Especially in these shaky economic times. And throughout the rest of 2009, and well into 2010, it's still going to be a bumpy road for everything. But long-term, we remain extremely bullish on renewable energy and grid development.

It may not have made as many waves as the Michael Jackson story, but last week, after the House passed the cap-and-trade bill, the media response was overwhelming. Not that anyone should be surprised. This is a huge issue.

However, it seemed that much of the earliest coverage stirred up an awful lot of hostility and opposition. And it was everywhere. From the most conservative blogs to the most liberal social media sites - those who oppose any kind of effective climate change legislation were not pacing back and forth in the waiting room. They were hitting up every possible media outlet to express their opinions and outrage.

Now I have no intention of opening up the global warming debate here. Those who believe global warming is some kind of scam are not going to change the minds of those who believe there's something to it. And vice-versa.

However, one thing that I'm finding increasingly frustrating is the amount of manipulated data that's being disseminated all over the internet...and mainstream media.

Let's first take a look at the data that was debunked earlier in the year - but was used as a rallying cry on Fox & Friends last Friday.

You've likely heard it before — that cap-and-trade will cost consumers an extra $3,100 a year. This is the figure that a handful of bureaucrats in D.C. came up with after massaging some data found in an MIT study.

John Reilly, one of the study's authors told House Minority Leader, John Boehner that the MIT study had been misrepresented in press releases distributed by the National Republican Congressional Committee. Reilly stated that it was misleading and simplistic to only look at the impact on energy prices, as it didn't account for the proposals that have been designed to offset the energy cost impacts on middle and lower income households.

Of course, it wasn't just Boehner's office that pumped out the press releases about the supposed high costs associated with cap-and-trade.

The Heritage Foundation chimed in with their analysis of the bill which they claim adds little more than a massive energy tax in disguise that promises job losses, income cuts and a sharp left turn toward big government.

Their cost estimate is $1,500 a year.

On the other side of the coin, we have John Reilly's estimate of about $800 a year. . .an EPA analysis which estimates a cost of between $98 and $140 a year. . .and a Congressional Budget Office estimate that puts the total at $175 a year.

I suspect all of these numbers have already been run through the opposition's spin mill, rejected thoroughly, and blasted back out on the internet.

Either way, no matter how accurate or manipulated the data - the truth will only be realized in practice.

Listen: Certainly no one wants to spend more money for energy. Especially during these rough economic times. And this is what opponents of climate change legislation are banking on - telling us that energy will cost more because it will cost more to produce. But isn't this really just an illusion - like the "cheap" energy we consume today?

I would argue that energy production would not cost more. The price we pay to the utilities for that energy, however, would. And there's a very important difference between the two.

What we're really talking about here is attaching an environmental cost to the production of electricity. But that cost has always been there. It's just that you and I never see that cost on our bill.

Bottom line: There is a definite environmental cost associated with the production and combustion of fossil fuels. And that cost is the deterioration of natural capital (water, minerals, fish, trees, oil, soil, air, and living systems, including wetlands, estuaries, coral reefs and rainforests)

Now before you write this off as some kind of random environmental agenda, hear me out...

As explained in the book Natural Capitalism (which is an absolute must-read for energy investors), natural capital has never really been valued appropriately. Rather, it has constantly been liquidated, thereby further enabling the deterioration of ecosystem services that really represent the most important type of capital - things like the regulation of atmosphere and climate, the cycling of nutrients and water, pollination, control of pests and diseases, and the maintenance of biodiversity. While the value of these free, natural, and self-regulating services are worth trillions annually, this value has never really been reflected on balance sheets.

Instead, the costs associated with the loss of natural capital have long been externalized onto the environment. i.e.) you, me and every single thing that lives around us.

And the truth is, we're only talking about CO2 with this cap-and-trade bill. As far as I'm concerned, there's still the mercury issues associated with coal, the waste issues associated with nuclear, and the security issues associated with our reliance on oil. These aren't included in the bill. But throw those on your tab, and you'll see an even higher cost per kWh (or higher cost per gallon of gas when referring to oil being used primarily as a transportation fuel)

Point is, the price we pay for energy today does not reflect the true cost of producing that energy. An effective climate change bill could at least begin to enable a more accurate cost structure.

I know, I know. No one wants to shell out a penny more for anything. And I'm no different. But if we truly believe in a free market system, than we should not resist a fair and accurate cost analysis of energy. Because the truth is, it's never really existed.

Now understand, I'm not saying cap-and-trade is the answer. To be honest, this thing is so politically-motivated, it's hard to figure out the most effective, and honest solution. Seems to me, the best way to do this is simply to charge consumers the REAL price. I'm confident that if no subsidies existed (direct or indirect) for any kind of power generation (fossil fuel or renewable), and ALL natural capital costs were figured into the equation - the market would dictate the rapid expansion of renewable energy and smart grid development, which would thereby enable a decrease in fossil fuel consumption, and ultimately a decrease in CO2 emissions.

While I don't expect that to happen anytime soon, there's no denying that the true cost of energy can no longer be swept under the rug.

And that's just one more reason we love renewable energy and smart grid. Because the further this stuff develops, the more folks will realize that fossil fuels may not be as cheap as we've been led to believe.

Now today, given all the momentum behind domestic energy development, we're bullish on the renewable energy and smart grid companies that have operations in the United States, currently generate revenue, and currently have the necessary capital to continue expansion efforts. These include, but are not limited to: SunPower Corporation (NASDAQ:SPWRA), First Solar (NASDAQ:FSLR), Ormat Technologies (NYSE:ORA), U.S. Geothermal (AMEX:HTM), Western Wind Energy Corporation (TSX-V:WND), EnerNoc, Inc. (NASDAQ:ENOC), Comverge (NASDAQ:COMV), and Itron (NASDAQ:ITRI).

Disclosure: Long ITRI