In Great Britain, more than 60 gigawatts (GW) of power, a quarter of that from renewable sources, reportedly is waiting to be connected to the nation’s power grid. In California, electric utilities say they have little hope of meeting the state’s mandate of achieving 20% of their generation from green sources by 2010 largely because of delays in getting transmission lines licensed and built. Meanwhile in Brazil, work is underway on what will be the world’s longest power line, which is being built with high-voltage, direct-current (HVDC) technology because it is ideally suited for hooking up renewable energy sources located in remote regions of the country.

Notice a trend here?

I never thought 2009 would be a good year for risky stocks, but my readers asked for them anyway. So far, my risk taking readers have not been burnt too badly, and the portfolio as a whole continues to track its benchmarks.

In my first quarter update for my green energy gambles for 2009, I noted that the portfolio had lost about 10%, between the benchmark returns (-12% and -5%), but not very impressive. Since then, the portfolio as a whole has gained a little ground, and is almost exactly midway between the benchmarks.

A little while ago, we received the following request from a reader:

While we don't plan on launching a licensable index or a mutual fund because of all the regulatory thicket we'd have to cut through, this request nonetheless led to a few internal exchanges about the merits of this idea and what could go into such an index/fund.

This year, I published a list of 10 clean energy stocks I thought people should buy, and, because of readers' requests, also published a list of ten speculative clean energy companies. For the most part, these speculative companies were chosen because they have compelling technology or manufacturing capability, but were not profitable or were only marginally profitable, and they had been beaten up because they would likely all need to raise money this year.

That means that if the financial crisis eases quickly, these companies should be able to raise money on favorable terms. If the crisis continues or worsens (which has so far turned out to be the case) the stocks will continue to fall. This is why they are gambles; as a whole, the portfolio is really a gamble on a quick resolution to the credit crunch.

In particular, the U.S. small wind turbine market grew over 20% and deployed over 9.7 megawatts (MW) of new capacity in 2008. Numerous new start-up manufacturers entered the market and small wind media inquiries were at an all-time high, reflecting this growth. Federal small wind energy, tax-credits are available at 30% of the cost, with no upper limit through 2016 (for existing homes and new construction).

Based on research data analysis, we project small residential wind turbines and solar PV are examples of technologies moving the U.S. toward realizing the new administration’s vision for a renewable energy future combined with creating thousands of new manufacturing and dealer jobs across the country.

The credit crunch made me reassess my investing strategy last September. First, my expectation of the lack of availability of credit for companies without reliable cash flow led me to sell several early stage and troubled companies.

Second, my experience of attempting to re-orient my portfolio in a hurry convinced me that I simply own too many companies. For the purposes of diversifying company-specific risk, nearly all the benefits can be achieved with as few as 10 companies, if those companies have sufficiently different performance characteristics. In less ideal circumstances, 20-40 companies will usually be sufficient. I currently own shares or have written cash covered puts in/ on approximately 100 companies, ETFs, or closed-end funds. I have closed positions in at least 30 more since September.

A year ago, I brought you 10 Alternative Energy Stocks I thought were worth speculating on for 2008. I revisited these in June, when a balanced portfolio of the 10 was "up 11.4% for the year, compared to the S&P 500 which is down 4.2% and the NASDAQ Clean Edge US Index, which is down approximately 14.3%."

Speculative picks tend to do better than the market as a whole in bull markets, and worse in bear markets, so given the steep drop in markets since then, I would normally expect these more speculative picks to fare worse. This is borne out in the fact that the more speculative the pick, the worse the stock performed. (I put these picks in rough order of riskiness, with the riskier ones given lower numbers. The exception to this rule was #9, Lighting Science (LSCG.OB), which probably would have been #3 except that I wanted to talk about it and the other LED stock Cree in the same article.)

A friend recently asked me how to invest in the Pickens Plan.  I named a stock (see below).

He then surprised me by saying "You are the fifth person I've asked, and no one else knew how.  Several said it could not be done."

Since I last covered clean energy mutual funds and ETFs, the sector has seen the launch of two solar ETFs: (KWT), the Market Vectors Solar Energy ETF from VanEck,  and (TAN), the Claymore/MAC Global Solar Energy ETF.   Continuing in the tradition of cute ticker symbols, First Trust's new global wind energy ETF is (FAN).

I recommend that investors stay away from the (very expensive) green energy mutual funds, and invest either in one of the ETFs, or if they have a few tens of thousands of dollars to invest and are willing to roll up their sleeves a little, they buy a representative sample of the stocks (a "tracking portfolio") held by the mutual funds and ETFs, and save further on expenses.

I'm a fan of investing in electricity transmission, both because the grid in the US is in a sad state of repair, and because considerable expansions to the grid will be needed to take large scale renewable energy (especially concentrating solar and wind) from the lightly inhabited areas with renewable energy resources to population and demand centers.

Unfortunately, the need for new transmission can put renewable energy advocates at odds with more traditional environmentalists, who are concerned about the local damage to views and habitat caused by new transmission lines. Cases in point are opposition which looks like it will prevent a proposed new line in West Virginia, and opposition to the "Green Path" transmission line which was proposed to allow geothermal, solar, and wind development in the Salton Sea area of Southern California.

This article is a continuation of my Ten Alternative Energy Speculations for 2008, with picks #8, 9, and10 published last Thursday. If you haven't already, please read the introduction of that article before buying any of the stock picks that follow. These companies are likely to be highly volatile, and large positions are not appropriate for many investors. My least risky picks (#8,9, and #10) are part of that same article; my most speculative plays (#1-3) will follow in a few days.

#7 Electro Energy, Inc. (EEEI)

Composite Technology (CPTC.OB) has two promising product lines: wind turbines and improved power transmission lines. Both businesses operate in sectors that are certain to grow in coming years. If either business can gain traction, Composite Technology could easily be worth much more than today’s $400M market cap. But make no mistake — at this valuation, a lot of high hopes are already priced in. If the company suffers any setbacks, or even fails to see high growth, investors will get hurt.

Most investors are attracted to the company’s wind turbine business. Alternative energy is hot. But unlike solar, there are not many direct plays on wind energy. Composite Technology’s DeWind subsidiary is building a 2 megawatt demonstration unit in Texas and already has a prototype operating in Cuxhaven, Germany.

Cleaning Up by Mark Veverka

Summary: More than fifty clean tech companies have gone public in the past two years as investors begin to grasp the fiscal upside of combating global warming and cleaning up the environment. Worldwide, governments are passing tough environmental bills. Says well-respected venture capitalist Vinod Khosla: "The likely trajectory of legislation on global warming is creating a great investment opportunity." ETFs like PowerShares WilderHill Clean Energy ETF (PBW) are one way for clean investors to go for the green. Barron's cover story singles out five stocks that are poised to rise on the tails of the clean energy movement:

The following stocks are a list of the pure plays, and semi-pure plays, in the field of wind energy. Companies such as General Electric (GE), FPL Group Inc. (FPL), and TXU Corp. (TXU), which have a very small portion of its business in wind were excluded from the list. Some of these stocks should be considered very speculative and none are recommendations.

I became increasingly bullish on this stock as a result of my changing understanding while I was researching the article. The article then initiated an email conversation with a long-time investor, where I learned more about the company's business. As a result, I just purchased more of the stock (at $1.33, using a limit order), quadrupling my initial position (acquired in February at $.91. My current average cost basis is $1.23.) Several of my clients also own this stock, which most of them bought below $1.

I've asked the investor to do a write-up on CPTC to share with AltEnergyStocks readers. It will probably be available later this week.