Has green lost its luster?
Of course not. Yet that seems to be the attitude of more than a few.
Sure, solar stocks have been battered over the past few months. But didn't the Dow (Index: DJI) go from over 13,000 to below 11,000 in the same time? Indeed, it did.
And hasn't Exxon Mobile (NYSE: XOM) gone from nearly $95 to to about $75 in the same time? Indeed, it has.
Even the incessantly-talked-about Transocean (NYSE: RIG) is down 15%. . . in just the past two months.
So for renewables to be dismissed as bad investments by bulls of other energy sectors is not only wrong, it's quite hypocritical.
Indeed, with the world's largest oil fields being depleted—some by as much as 15% per year—and natural gas facing a similar long-term plight, we're going to need all the energy we can get. And there's plenty of money in all of it.
But you must realize, new oil discoveries, and even arctic and offshore drilling, are certainly no catholic cure. In fact, the amount of oil they're providing—and could potentially provide—is absolutely not enough to offset rising demand and oil field depletion, not to mention that oil is increasingly more expensive to extract. This is an often overlooked aspect of new oil finds.
Yes, there's money to be made from the remaining oil and the companies that refine the ever more heavy and sour crude. And I'm not against making that money.
But to think that there will be no serious energy transition to include a large share of renewables coupled with efficiency is naïve at best, and moronic at worst.
That said, let's look at the billions of dollars that continue to pour into the green sector even during this progressively bearish market.
Renewable Energy Markets: Investment Magnet
According to New Energy Finance, one of the world's most highly respected renewables analytics firms, private equity and venture capital deals in cleantech surged to a record $5.8 billion in the second quarter.
If the technology had no future, would it be bringing in record investment dollars at the most foundational levels? Hardly. Surely you can remember the internet naysayers of the 1990s. And look how that turned out. . . you're reading this on the internet, and it's marvelous.
These green technologies that are being invested in today on a very nascent level are going to be the energy juggernauts of the future. From my perch, it's inevitable.
But back to that second quarter $5.8 billion investment, which, by the way, is more than double the $2.6 billion invested in the first quarter.
You know where that money went: wind, solar, and second generation biofuels.
And speaking of oil companies and second generation biofuels, check out where BP (NYSE: BP) thinks transportation fuels are headed. On Wednesday, they announced a $90 million partnership with Verenium (NASDAQ: VRNM), to speed the development of cellulosic ethanol.
Verenium shot up over 75% on the news. . . in two days.
More affirmation of the ethanol market came this week when the EPA decided to uphold the increased Renewable Fuel Standard (RFS) signed into law last December, which increases the amount of renewable transportation fuels used annually to 36 billion gallons by 2020—16 of which must be cellulosic ethanol.
Texas Governor Rick Perry had requested that the EPA cut the RFS mandate by 50%. He lost.
Back to green energy investment. . .
Beyond second generation biofuels, wind and utility-scale solar continue to be hotbeds of investment. According to a recent Wall Street Journal Environmental Capital posting:
Wind energy in the U.S. is still going strong, despite the lingering uncertainty over congressional extension of tax credits for clean energy. The American Wind Energy Association today said second-quarter wind-power installations fell slightly from the first quarter, to 1,194 megawatts. But the wind lobby said 2008 should be another record year overall, with more than 7,500 megawatts installed, provided Congress finally renews the tax credits.
Power companies in the U.S. and Europe are increasingly looking to new types of solar power for big clean-energy installations, rather than do-it-yourself rooftop arrays. Biofuels have gotten a bad rap, but the next generation-made from stuff you can't eat like waste wood and algae-is drawing multi-million dollar investments.
We now know that pre-public cleantech companies are still attracting gobs of investment.
So what's the problem with publicly traded companies?
Publicly Traded Renewable Energy Companies
Part of the problem stems from the fact that renewable energy companies are finding increased resistance to listing publicly. This is do to instability in the overall equity markets fueled by a credit crunch, a mortgage mess, and a weak dollar.
That precarious situation has shelved several cleantech IPOs, making it harder for early-stage investors to recoup their investments.
Even though companies raised $5.2 billion in public markets during the second quarter, over half of that came from just one listing: Portugal's EDP Renovaveis.
Nonetheless, that $5.2 billion was monstrous jump over the dejected $1 billion during the first quarter—a sign that conditions may be starting to improve.
Until conditions completely improve for new entrants, one must embrace the current culture of the market.
There are plenty of bargains to be had in these troubled waters. Great companies, across all renewable sectors, have been beaten down as a function of broader market conditions.
Chinese solar companies, for example, are painfully oversold. And their rebound to levels of old will certainly provide gains congruous with the amount of of their recent losses—about 46%, on average.
I'm talking about companies here like JA Solar (NASDAQ: JASO), Solarfun (NASDAQ: SOLF) and Yingli (NYSE: YGE).
The same holds true for other renewable sectors.
Indeed, the bull market in energy is long from over. In fact, we're just in the first inning. The downturn in energy stocks due to negative external conditions is only a bump along the way.
As long as demand continues to rise exponentially—and we all know it will—then the energy, and particularly the renewable energy, bull market is destined to press on.
Call it like you see it,
Nick
P.S. My Alternative Energy Speculator continues to make money in this difficult time. By employing a strategy that consistently uncovers oversold and underloved cleantech stocks, readers of that publication are sitting on no less than six double digit winners. Check out just one of the recent opportunities.
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Solar and wind energy are useful for small-quantity power generation in select locations. But at terawatt levels, immense areas of land and/or sea would be needed, requiring enormous maintenance operations, spoiling scenic land- or sea-scapes, and destroying local ecosystems. As scientifically documented in "The Nuclear Imperative - A Critical Look at the Approaching Energy Crisis" (ISBN 1-4020-4930-7), by 2050 when petroleum fuels are basically exhausted, only uranium and thorium can affordably sustain global energy needs for some 3000 years, using proven fuel reprocessing and advanced reactor technology. A serious in-depth analysis of our future energy shortage by engineers (not by anti-nuclear hand-waving philosophers) reveals that nuclear power is essential to rescue our children from a future economic collapse. For the USA, 500 additional nuclear reactors are required, built on 9000 acres (@ $1.5 trillion), compared to 1,500,000 windmills with storage batteries on 6,000,000 windy acres (@ $4.5 trillion). Ten times these numbers are needed for the entire world. (Costs are in 2006 dollars; for later years, these costs must all be multiplied by the dollar inflation factor).
Because it takes a decade to design, license, and build a reactor, action must be taken immediately to prevent an economic catastrophe by 2030 when oil starts to run out. Contrary to false propaganda by anti-nuclear groups, the cost of electricity at terawatt levels is three times less expensive with nuclear than for wind or solar. Solar and wind power generation requires expensive energy storage systems (batteries, etc) when there is no sunshine or wind. Also many miles of access roads for maintenance and repair are needed to keep blades or solar panels clean from bird droppings, dead birds, sand erosion, and storm damage, and to periodically replace electrodes on storage batteries. Aficionados of renewables usually quote peak windmill or solar station capacities, neglecting to multiply their numbers by a factor of four to account for a year-averaged availability of only 25% of peak wind or sunshine. Reactors run continuously all year at 90% capacity. Should the USA limit itself to solar and wind energy, it is guaranteed to become impoverished and dependent on portable synfuels imported from other countries (the future OPECs), who have expanded their nuclear power generation when oil fields are depleted.
Modern nuclear power plants are absolutely safe. Because of the negative "coefficient of reactivity", reactor fuel elements only melt (an explosion is not possible) during a maximum credible accident in which the emergency core cooling system totally fails. This was "experimentally" proven in the Three-Mile-Island (TMI) accident. A negative coefficient of reactivity means that neutron multiplication is automatically stopped when the temperature in the reactor gets too high. The Russian Chernobyl reactor which took the lives of approximately 60 people, had a positive coefficient of reactivity because it used graphite as moderator, a design for nuclear power plants which is now prohibited in all countries. Furthermore the Chernobyl reactor had no containment vessel, as is the law in all Western countries and now worldwide. The assertion that perhaps thousands of people could still die from radioactive fallout around Chernobyl is nonsense. Of the 60,000 inhabitants of Pripyat who had been exposed to fallout, about 9,000 will die at an advanced age of cancer because worldwide 15% of all people ultimately die from cancer. To ascribe those 9,000 deaths to Chernobyl's fallout is equally ridiculous as claiming that such a death toll is due to drinking coffee because 15% of all people drink coffee. Security precautions and containment measures for today's nuclear power plants do reckon with the possibility that terrorists might crash a large airplane or bomb on a reactor. Even if aerial obstructions (e.g. balloons) or underground construction can not prevent penetration of the large dome-shaped containment vessel, the reactor core vessel is designed to remain mostly intact. It can further be inundated with neutron-poisoning borated water which suppresses all further uranium fission in case of an accident.
A stale anti-nuclear cry is "what do we do with all the long-lived radioactive nuclear waste". The volume of waste amounts to one aspirin tablet per year per person using nuclear electricity, compared to tons of air pollutants and globe-warming gaseous CO2 emitted by coal or fossil-fuel combustion. Nuclear waste can be easily stored and safely transported, as the US nuclear navy has done for half a century. Contrary to allegations that uranium and plutonium in spent fuel elements pose a problem because of million-year half-lives, they are separated from fission products by reprocessing and burnt as fuel in future fast-breeder reactors. They will not be dumped. This reduces 50,000 tons from ten-year accumulation of spent fuel to 500 tons (with shorter decay lives) of fission products, taking centuries instead of decades to fill the Yucca Mountain repository in Nevada. The notion that long radioactive lifetimes are undesirable is also erroneous. The longer the decay lifetime, the less the radiation emitted per gram of radio-isotope. Most elements that make up our bodies (hydrogen, oxygen, nitrogen, etc) have infinitely long decay lifetimes. All humans are "hot" because everyone has radioactive potassium-40 (K-40; 0.012% abundance) in his body, which continuously emits beta particles with a half-life of one million years! Man successfully evolved in this environment, and there are even indications that low levels of radiation benefit health (called hormesis). The hue and cry about possible terrorism and "dirty bombs" is also highly exaggerated. By the reasoning of anti-nuclear activists, we should stop flying 707 jets because they can be used as weapons to kill thousands of people.
Energy is man's third most important need after water and food. Those who hinder expansion of nuclear power will be viewed as irresponsible neo-luddites by future generations. Any further delay of a committed worldwide nuclear energy program will cause certain impoverishment and death of many people by 2050. Those responsible will and must be held accountable for this. Without greatly expanded nuclear power, Las Vegas and Phoenix will become ghost-towns. Originally the US had planned to have 300 reactors by the year 2000, but instead there are only 104 today. After the Three-Mile-Island (TMI) reactor meltdown in 1979 in the US (with 0 casualties) and Russia's Chernobyl accident in 1986 (with 57 fatalities), public hysteria fanned by fear-mongering antinuclear activists caused cancellations and moratoria on construction of new nuclear plants. While the USA was once the leader, most US businesses with reactor manufacturing know-how closed. Instead France, Russia, Japan, South-Korea, India, and China are now in charge. Zealous anti-nuclear lobbyists and mal-informed governments have created the pending energy crisis. We are entering a war-like energy-deprivation period as serious as WW-II or Al-Qaida. Strong Manhattan-project-like leadership is needed.
Jeff W. Eerkens, Ph.D
Adjunct Research Professor,
Nuclear Science and Engineering Institute
University of Missouri, Columbia
Also, concerned investing in companies and industries dependent on congress approving additional subsidies. That is how we get into problems.... LET THE MARKETS be free.