Leaks in the alternative-energy bubble

Please change your title to biofuel or something. Almost all investment money these days are gone to solar energy stocks and they have been on average up more than 70% with many being up for much much more. Nobody is talking about biofuel energy stocks and there is no bubble in biofuel — their stocks have been going down for a while now.

What a joke. Has everyone forgotten the 13 billion in tax breaks big oil receives in the next few years + the fact they pump on gov’t land but do not pay mkt rate for those opportunities. Lets be honest - they both receive help - just people use the info selectivity

The advantage to wind and solar is the “fuel” source is not connected to a commodity market. Most investors are not willing to commit to the high capital start-up costs of a wind farm or large scale solar array. As in nuclear power (which has the lowest per kilowatt-hour costs) much of the reneewable energy sources are pretty much de-linked to the commodity markets. Subsidies have always been needed in all major economies to facilitate new industries. Most of the consumer electronic base in the US developed because of military expenditures (don’t forget DARPA). Southeast Asia assumed the control of the world consumer electronics market by a massive co-ordinated public/private effort. If you look at any successful large scale industry there have been artificial subsidies and supports from time to time.

I think the current renewable energy “craze” has three underlying fundamentals - 1) most of the worlds oil supply that is relatively easy to extract is either diminishing in productivity and/or controlled by a unstable government. 2) economic growth although expanding at a slightly diminishing rate will continue to put upward pressure on natural gas and other fossil fuel based sources of energy for transportation needs and agricultural endeavors (more people want to eat and drive to work then ever). 3) yes, global warming is real, very real - we need to in a co-ordinated fashion develop a world-wide effort to reduce carbon emissions - no exceptions. Coal is a great source of energy but at present a carbon neutral way to utilize coal as a fundamental energy source is a long way off.

Increasingly there are more articles that discuss many diverse ways to handle the significant engineering problems associated with renewable energy. Energy storage has been identified as a major hurdle before many renewable energy sources can effectively be deployed. There are challenges no doubt - but that intrigue adds additional interest and investment opportunity. Venture capital investors are not looking for opportunities in well established markets. The investment opportunities are found in the beginning stages of the development of new technologies.

There is another dimension that should not be negleceted - the typical, developed world consumer. This is the market. The “consumer” doesn’t always make decisions like an economist or a CEO. The consumer sometimes does look at other factors. The higher cost of hybrids apparently has not precluded many consumers from investing their own money to achieve better personal fuel economy. More recent polls do suggest that many consumers throughout the developed world are willing to pay a higher cost for clean energy if given the opportunity. Most people do understand that their time on this planet is limited and that their grandchildren will inherent what this generation leaves behind. Do not underestimate this ethical dimension. This is a real effect. People do want clean water, safe food, healthy flowing rivers, protection from severe storms and a sense that the world is protected.

Then there is one final reason why solar and wind especially have an advantage - water. Water is not required to cool a wind farm or a PVC array. Water is becoming more scarce near population centers throughout the world. Solar and wind can augment energy needs incrementally and fit in to existing systems withour adding additional demands on the water supply. Coal, nuclear, natural gas-fired electricity has a high water requirement. In the developing world where water resources are scarce renewable energy facilitates a scalable solution to developing electricity generation.

There’s really no such thing as a “market” in renewable fuels. The level of government subsidy to solar, wind, ethanol, etc is so high that is skews any comparison to what a true free market might produce. Without taxpayer subsidy, renewable fuels are not close to competitive with more traditional forms of energy. Should those subsidies be withdrawn, these “investments” would be worthless.

Just because the market is not currently right does not mean that these types of conditions will not arise. Car manufacturers are constantly looking for new technologies. If you don’t believe me, check out challengex.uakron.edu. The University of Akron team is involved in a General Motors sponsored challenge to develop better emissions and fuel economy.

However, it is hard to squash Big Oil and therefore many factors need to happen for biodiesel and ethanol to take place. E85 flex fuel vehicles are a start, but the government, car manufacturers, and the new fuel companies must all work together to beat Big Oil. But do they really want to? Big Oil is worth big money to both the manufacturers and the government.

….hmmmmm