The New Alternative

Giving a speech at an alternative vehicle conference recently, I asked the crowd when they thought hydrogen, battery, or biofuels would be the norm and petroleum would be the “alternative”. Most hands went up at 20 years; some at 10; a very few at 5. None would have said “last year”.

But that’s the remarkable fact, according to a report issued last week by the United Nations. In 2008, $140 billion was invested in wind, solar, and other renewable sources of energy. Only $110 billion was invested in coal and other fossil fuel generation. What may be more remarkable was that investors would put anything into fossil-fueled power plants, knowing they were committed to buy billions more for the fuel itself over the fifty year life of those power plants, compared to zero fuel cost for wind or solar.

So with our personal investment portfolios in tatters after the market meltdown of the past six months, can average investors make money on this trend that puts renewables into the mainstream? My son and his college fund certainly hope so.

To take advantage of this massive movement of capital and policy, I would focus on three things:

 

-       Energy efficiency - - 30 states have mandates for a % of electricity to come from renewables in the next few years. To meet that goal, utilities are adding more renewables, but also investing in making how we use electricity more efficient. Invest in companies that make energy-efficient lighting, doors/windows, insulation, system controls, heating and a/c units.

 

-       Renewables - - Hard to buy a wind farm or solar array, but lots of companies make things needed by the developers of renewables. Wind turbines, solar panels and controllers, digesters, and companies that install solar on residential rooftops (a growth area in an otherwise slow building industry).

 

-       Financing - - Some interesting plays out there on companies that finance building retrofits and get repaid from energy savings. Others finance solar projects for utilities or school districts (reliable customers, so good bets).

I don’t recommend specific companies in these categories because half the fun is doing your own research and finding them, but also because many of the best are privately held, so you may want to investigate venture, equity, and hedge funds (depending on your risk tolerance) that invest in this space and put your money with the best of those.

Or, you might invest to retrofit your own home or business to make it more efficient; then add some small solar or wind; maybe even a battery system to take you off the grid completely. You’ll save money on electricity, help the environment, and probably add a lot of value to your buildings. What better “alternative” is there to that?!

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