Investing in Alternative Energy
Over the last three years publicly traded alternative energy have been very volatile, with some 2007 returns in excess of 100%, some 2008 returns down 90% or more, and peak-to-trough returns in 2009 again over 100%. In general there are three subsegments of “alternative” energy investment: solar energy, wind energy and hybrid electric vehicles. Alternative energy sources which are renewable, free and have lower carbon emissions than what we have now are wind energy, solar energy, geothermal energy, and bio fuels. Each of these four segments involve very different technologies and investment concerns.
For example, photovoltaic solar energy is based on semiconductor processing and accordingly, benefits from steep cost reductions similar to those realized in the microprocessor industry (i.e., driven by larger scale, higher module efficiency, and improving processing technologies). PV solar energy is perhaps the only energy technology whose electricity generation cost could be reduced by half or more over the next 5 years. Better and more efficient manufacturing process and new technology such as advanced thin film solar cell is a good example of that helps to reduce industry cost.
The economics of solar PV electricity are highly dependent on silicon pricing and even companies whose technologies are based on other materials (e.g., First Solar) are impacted by the balance of supply and demand in the silicon market. In addition, because some companies sell completed solar cells on the open market (e.g., Q-Cells), this creates a low barrier to entry for companies that want to manufacture solar modules, which in turn can create an irrational pricing environment.
In contrast, because wind power has been harnessed for over 100 years, its underlying technology is relatively stable. Its economics are largely determined by siting (e.g., how hard the wind blows and the grid investment requirements) and the prices of steel (the largest component of a wind turbine) and select composites (used for the blades). Because current wind turbines are often in excess of 100 meters high, logistics and a global manufacturing platform are major sources of competitive advantage. These issues and others were explored in a research report by Sanford Bernstein. Some of its key conclusions are shown here.
Read more about this topic: Alternative Energy
Famous quotes containing the words investing, alternative and/or energy:
“After all, the chief business of the American people is business. They are profoundly concerned with producing, buying, selling, investing and prospering in the world.”
—Calvin Coolidge (18721933)
“No alternative to the
one-man path.”
—Denise Levertov (b. 1923)
“Because humans are not alone in exhibiting such behaviorbees stockpile royal jelly, birds feather their nests, mice shred paperits possible that a pregnant woman who scrubs her house from floor to ceiling [just before her baby is born] is responding to a biological imperative . . . . Of course there are those who believe that . . . the burst of energy that propels a pregnant woman to clean her house is a perfectly natural response to their mothers impending visit.”
—Mary Arrigo (20th century)