Investors see opportunity in efficiency and wind

Energy stocks are looking attractive

Posted by Joseph Romm (Guest Contributor) at 5:08 PM on 10 Jan 2008

The following essay is a guest post by Kari Manlove, fellows assistant at the Center for American Progress.

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turbine-being-built CNNmoney.com just released a summary outlook on the solar, wind, biofuel (mainly ethanol), and efficiency industry financial sectors. The two looking most optimistic are wind and efficiency, and thus both sectors are overflowing with opportunity.

According to one investment portfolio manager, efficiency investments are reliable and essentially fundamental. In his words, investing in efficiency is like putting your money on the arms dealer in a war or conflict -- no matter which side wins (or which sector), the arms dealer simply can't lose.

Of the "riskier" sectors, analysts are most optimistic about wind power. But they lament that there is no U.S. manufacturing company in which to invest -- the two main options are European. In this one fact, there are several implications and opportunities.

The U.S. is trailing the world in terms of renewable energy technology and manufacturing. The is hard to come to terms with because it's not natural for us to be lagging where there are so many exciting possibilities.

But there is an opportunity here: we need to be investing more of our future into this industry -- into research, development, and deployment, capital, manufacturing plants, and "green collar" jobs. Wind farm installation cannot be exported abroad, nor should turbine manufacturing or investment in those companies be shipped elsewhere.

It could not be more clear which sort of major investment needs to be made into wind energy (and other renewable energy sectors). The Center for American Progress has framed our energy and climate crises as looming economic opportunities (in their "Capturing the Energy Opportunity" report), and CNNmoney's report reiterates just that point. Without moving into these blatant spaces, we're leaving gaping holes in our economic prosperity, global competitiveness, and energy future.

This post was created for ClimateProgress.org, a project of the Center for American Progress Action Fund.

For story: Investors see opportunity in efficiency and wind
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but be careful what you wish for...

...lest you mistake an investment opportunity with a sound business plan. The fact that something is a good investment simply means it's undervalued. But if it becomes sexy and everyone invests in it, it will become a bad investment opportunity by virtue of the fact that it is overvalued - and the only difference between the undervalued case is the way that dollars sloshed in the investment community, rather than any change in the business fundamentals.

As an example, I was recently at a dinner in NYC with a bunch of banking analysts. The guy with me was explaining to me why Nokia was a much better investment than Motorola, primarily because Motorola consistently met it's earnings forecasts, while Nokia consistently exceeded them. Makes sense from a stock perspective, but it doesn't suggest anything fundamentally about either business. (Indeed, some would argue that the company that consistently and accurately projects its future has a better handle on it's business.)

This isn't a bad thing - just that we ought not to draw too many conclusions from whether or not something has a "buy" or "sell" rating vis a vis it's long term business prospects. And indeed, if everyone decides that a given business is really well run, we could end up with a lot of press telling us that the stock is overvalued and we ought to sell, sell, sell... which again, makes sense from an investment perspective, but not in terms of any business fundamentals.

Such is the way of public markets.

by Sean Casten at 6:56 AM on 11 Jan 2008

Offshore and Coastal Wind Farms

Very astute logic here on investments by the author and Sean. To me the risks are greatest along the coastal areas, particularly ones in submerged offshore areas. The costs of installing and maintaining coastal and offshore wind turbines is possibly double that of an inland program. The salt eats everything; submerged pilings are very difficult to anchor; many coastal areas are located on very active bird migration routes. Do the concepts of "hurricane" and "global warming" mean anything here?

The situation in Texas is not exception although I won't bore you with the details here, noting that Senator Kennedy does not live down here (re: Nantucket wind farms in coastal waters). These kinds of concerns should mean something to alternative energy fund managers, however.

'Nuff said.
-sammie

Onward through the fog

by Sam Wells at 11:40 AM on 11 Jan 2008

On growing renewables...

It's good to see growth in wind energy, even if the expertise now lies with the Europeans.

I was just thinking today of how to grow the "sustainable" sectors of the economy. Recently at Grist we've had interesting discussions about growth and the economy. Eventually we're going to have to transition to a steady-state economy if we're going to be able to save the Earth. (Remember a 3% growth rate in GDP means a doubling on the load on the environment in 70/3 = 23 years.)

But the end of economic growth is going to entail a new way to generate investment capital (to pay off loans with interest). However, if we would be able to "tweak" the economy in certain places (as suggested by Jon Rynn), then we could choose to grow only the healthy, sustainable parts of the economy. We could let the unhealthy parts (high-carbon, war machine, etc.) parts die off, and end up with a net zero-growth economy (that is, a constant level of wealth).

Now, the "tweaking" could be in the form of shifting subsidies (from carbon to renewables). But given the nearness of peak energy (Matthew Simmons now believes peak oil happened in 2005), I think we'll have to be thinking of energy-rationing in the not-too-distant future. Well, why not set up an energy distribution system that also "tweaks" the economy? That is, we could set up a hierarchy of "energy-needs", and place the parts of the economy we wish to grow in the higher priority brackets.

Anyway, just a few random thought today...

by Colin Wright at 10:38 PM on 12 Jan 2008

On "business as usual".................

.........citing one relatively small example of many economic expansion schemes that are posed to humanity by unbridled and soon to become patently unsustainable economic globalization activities now overspreading the surface of the Earth.

> http://break.com/index/how-we-got-into-the-subprime-mess. ...

Steven Earl Salmony
AWAREness Campaign on The Human Population, established 2001
http://sustainabilitysoutheast.org/

by stevenearlsalmony at 8:34 AM on 13 Jan 2008

Colin --

It would seem that oil should be at the top of the hierarchy, in other words, it's sort of ridiculous to be wasting this miracle substance on automobiles. It should be saved for construction machinery and other off-road uses, in order to put up all of the wind farms/solar thermal farms/geothermal plants and geoexchange units.

Then coal could be reserved for the factories that make all of that equipment, with maybe natural gas being used up for electricity generation until the wind/solar/geothermal kicks in. Of course, we'd have to have enough wind/solar/geothermal energy to make more wind/solar/geothermal energy.

by Jon Rynn at 3:53 PM on 13 Jan 2008

If I were king for a day

I dunno, comments about "tweaking" the economy smack of some kind of hubris, like Tom Petty wishing he could be king for a day. The point about the original essay was that in the energy investments, solar, wind, and some energy conservation are looking much better than in the past. We're talking private corporate money here, and as was pointed out, many of the investments on the manufacturing side are coming from EU countries and places like Australia. Has our country run out of intellectual steam so bad we have to import everything, including the green energy stuff?

Onward through the fog

by Sam Wells at 8:56 PM on 13 Jan 2008

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