Gore's Renewable Energy Challenge, And How It Would Shift Investing

by: Hard Assets Investor

By Julian Murdoch

Al Gore has thrown down the gauntlet. It's certainly not the first piece of hand wear he's tossed around, but this time he's actually invoked Kennedy. He has made his "we will go to the moon" challenge, but it's a green planet he's focused on.

I challenge our nation to commit to producing 100 percent of our electricity from renewable energy and truly clean carbon-free sources within 10 years.

Reaching for the stars indeed.

Let me suspend both my hope and my cynicism and look at this challenge from an investor's point of view. Assume this challenge is achievable. Assume a presidential candidate gloms on to it, makes it a major part of his campaign platform and then, that the country rallies behind it and succeeds.

How does that change my investment strategies?

Day one: Dump all my oil, gas and thermal coal holdings - not only to free up cash for other investments but because they would end up being fairly worthless by the end of Gore's 10-year challenge period. Okay, perhaps not worthless, but if the U.S. just got out of the carbon-fuels business, the ripple effect would be tremendous and likely dampen the oil markets for decades. After all, with this newfound, high-efficiency electric grid will come a greater support system for electric and alternative-fuel vehicles.

Now, what to do with that money? Since wind, solar and geothermal power aren't tradable commodities, I'd delve into the manufacturing companies that supply the parts that make the world go round. Metals - the most basic and most obscure - would be in high demand: wind turbines and photovoltaic cells that will be needed to complete Gore's vision, not to mention a complete overhaul of the nation's electric grid. The real challenge would be getting on board with the right venture cap funds. Much of the technology to meet this challenge is nascent, and small companies with niche patents could be the biggest windfall beneficiaries.

And finally, the national electrical grid is in such bad shape and needs vast repairs and expansion if this plan is to work. Investing in the companies that will do the work - electric utilities - would probably be the first area of my new investments to show positive returns. These are ultimately old-economy companies doing hard, physical work, and would need capital in a hurry to get the job done.

Oh yeah, one last investment. A cherry red 1967 Mustang - a nice museum piece and reminder of the good ole days of carbon-burning cars.