Investing in Alternative Energy

“Our present national and international leadership is reluctant even to acknowledge that there is a problem.  The crisis will occur, and it will be painful.    Civilization as we know it will come to an end sometime in this century unless we can find a way to live without fossil fuels.”

David Goodstein
Vice Provost & Professor at the California Institute of
Technology  Out of Gas:  The End of the Age of Oil

“Most likely the end of the Petroleum Interval will be gradual wherein no crisis point is reached, just slow change.  But, especially with continually rising populations, and no sufficient substitute for oil at hand, there is the possibility of a chaotic breakdown of society.”

Walter Youngquist
Retired Professor of Geology, University of Oregon
Author of Geodestinies 
 

Many intelligent people, like Youngquist and Goodstein, are going farther out on a limb to suggest that we have a real problem with our fossil-energy-based society.  The voices are not yet shrill, but they are ratcheting up. The search for an energy alternative is the biggest challenge of this generation.  We must replace fossil fuels for three reasons:

  1.  We are probably destroying our planet.
  2. We will probably run out of non-renewable fuels soon (we have passed 1 trillion barrels of the estimated 2 trillion barrels of petroleum.)
  3. We are funding both sides of the war on terror.

In the U.S., gas will continue to increase in price because:

  1. Finding and refining the last petroleum pockets is more expensive.
  2. Billions more people want gas:  China has surpassed Japan as the second largest petroleum importer, and cheap ($3000) cars are in the pipeline to sell in India and China.  (Already, 450,000 Logans have been sold at $7200 each.)
  3. The U.S. dollar will continue to drop as we finance wars and the purchase of cheap goods overseas.

As gas and other traditional energy prices soar, the market for renewable energy will explode.  Already, solar power shows promise:  I bought Sunpower Corp (SPWR) at $28.50 and it sits today at $57.59.  World Water and Power is a tiny solar company that had rejected an earlier financing, leading me to believe that the management had confidence in its future.  I bought WWAT at 27 cents and again at 65 cents.  Suntech Power Holdings (STP), headquartered in China, is another solar grower. 

Ocean Power Technology (OPTT) is the first public company to attempt to exploit ocean power:  its IPO came out at 20, and I watched it go down every day – not everyone believes in this stuff.  I bought when it stabilized at $14.50 and it’s at $17.55 today – about a week later. 

Individual stocks are subject to aberrant executives and boards, so I take positions across the industry.  However, looking back ten years from now, we may see making money in renewable energy like shooting fish in a barrel. 

There will be plenty of other ways to play the energy business.  Someone will have to replace our fleet of gigantic cars.  Already, you can see SUVs starting to line the sides of roads:  the first desperate consumers are selling their big vehicles now.  Honda’s a great engineering company and is a leader in high-mileage vehicles.  Ford could reinvent itself, too, but I don’t think their culture, their unions and their dealers will let them get out of their own way – too bad.

Oil companies like Devon Energy (DVN) and Valero (VLO) bring special talents to the problem:  Devon’s deep drilling has discovered new reserves in the Gulf of Mexico and Valero’s refineries crack heavy crude. 

What’s the fly in this ointment?  Coal, tar sands, nuclear?  Monkeys could fly out of….  While we have 300 years of coal, all of these mined fuels will run out and they all rely on water (another precious commodity going forward.)  You could fill Lake Ontario with the water it would take to clean enough tar sands to supply the U.S. for a year.  Hydrogen?  It’s not an energy source;  it’s a transport mechanism.  Fusion?  That would be great.  They’ve been at it for about 40 years, and, if they ever figure it out, we’ll have virtually free energy forever.  Buy electric cars!  If someone solves the energy problem outside of renewable energy, we won’t have to worry about our alternative energy portfolios because the rest of the economy will be fantastic.  In the meantime, renewable energy looks like an important bet to make now. 

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Published in: on May 8, 2007 at 10:40 pm  Comments (1)  

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  1. Great post! I would like to add to it by recommending for any potential investors interested in buying energy stocks a great article that discusses and details the market as a whole as well as gives a company profile of Spectra. It’s really interesting so take a look. It really opened my eyes.

    Alternative Energy Research Report Online

    Enjoy!…Cheers


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