As the world searches for clean energy, a new field of green investing begins generating its own “clean” power.
Crude oil reached new highs for 2009 over the past few months and, along with it, gasoline prices climb higher every day. Electricity and natural gas costs to heat and cool our homes has risen dramatically, in spite of local, state, and federal Government attempts to control spiraling prices. Consumers are being squeezed, while businesses struggle with declining profit margins. Amid this chaos, a groundswell of support for development of “clean” energy sources is building, helping to rejuvenate and reshape an alternative energy industry struggling for decades to become relevant in a world long-since addicted to foreign oil. In this article, I’ll touch on the underlying reasons for this re-emergence and explain how a new field of investing has sprung up alongside the alternative energy industry.
Why the renewed interest in alternative energy?
There are many reasons for this renewed interest, but the primary drivers are the rising cost of oil & gas and concerns about global warming. With $4 a gallon gasoline already reality for many, it’s hardly surprising that world energy demand is growing exponentially. From 2002 to 2030, global energy demand is projected to increase by 50% to 16.3 billion tons of oil equivalent, according to the International Energy Agency (IEA). The IEA expects over 70% of this increase to come from emerging markets such as China, who alone is expected to account for 30% of the increase. But the supply of crude oil is finite. To meet this rapidly rising demand, it’s not hard to understand why oil and its derivative products are getting more expensive.
Global warming – it’s become a ‘battle-cry’ for some. According to NASA, the five hottest years ever recorded since the 1880’s have been, in order: 2005, 1998, 2002, 2003, and 2006. The Earth is warming up and, according to a growing consensus of scientists, the warming is likely related to concentrations of carbon dioxide in our atmosphere. The National Center for Atmospheric Research said recently “the level of CO2 in the atmosphere is now higher than it has been in at least 750,000 years and is approaching levels that have probably not occurred in the last 20 million years.” Because burning fossil fuels such as oil & gas contributes significantly to atmospheric CO2, many global citizens believe “clean” alternatives are essential to our very survival.
What are “clean” energy alternatives and can I invest in their growth?
So-called “clean” energy alternatives are not new, but are becoming more prominent as our planet’s supply of fossil fuels declines, demand for energy grows, and global warming gains scientific credibility and consumer outrage. What are some of the leading “clean” energy alternatives? Wind, solar, geothermal, biofuels, hydro, fuel cells, and ocean/wave-power are but a handful of the technologies being developed to help fill the energy generation void of the future. Ethanol is an example of a biofuel, whereas a Hydrogen-powered automobile is a prime, albeit futuristic, application of fuel cells. It’s impossible to predict which technology(ies) will emerge over the next few years and decades to eventually, gradually, supplement oil as the primary energy source for most of the world’s people. Many experts feel some combination of these technologies, along with energy conservation and efficiency initiatives, will shape tomorrow’s energy landscape.
In conjunction with the rejuvenation of alternative energy, a new field of investing has emerged which attempts to capture the growth potential of new “clean” energy technologies. Within the past 3-5 years, several “clean” energy investment portfolios have been launched. Equity research departments and investor newsletters have started covering alternative energy stocks, while socially responsible investing (SRI) – and its cousin “clean” energy – strategies are available in some brokerage advisory accounts.
The next time you fill up your tank, remember that green signifies not only the An Inconvenient Truth environmental movement politicized by Al Gore, but green also represents the color of money. And while you visualize all those $4 bills going down the hose through the nozzle and into your gas tank, you might also consider whether “green” energy might not someday both stabilize the planet’s temperature and also line your pockets in “green”.