Energize Your Portfolio
fool.com
Oil hovers near $50 a barrel. Fossil fuels are becoming scarcer. Do you wonder where fuel will come from in 20 years, or even in 10 years? Then call thyself Rule Breaker, Fool, and join contributor Tim Beyers in pondering the investment possibilities in renewable energy sources.
By Tim Beyers (TMFMileHigh)
January 31, 2005
If conversation and consternation over renewable energy translated into action, we'd be a wind-powered society by now. We're not.
According to a Web site produced by the Union of Concerned Scientists, America's utilities were using renewable energy sources to generate only 2% of their electricity as of May 2004. With the delays and disappointments, it doesn't sound like a field ripe for investment, right? Wrong.
[...]
Full of hot air
Of all the available renewable energy sources, hydrogen just might have the worst reputation. And it's no wonder. You remember the Hindenburg, right? But it's a bad rap.
Hydrogen is the simplest and most abundant element in the universe. Fuel cells capture the chemical energy it generates to create electricity, and with no fiery explosions involved in the process. Nope, instead of smog-producing smoke, fuel cell-powered autos would emit nothing more than distilled water. No wonder the president made fuel cells a cornerstone of his 2003 State of the Union address.
Since then, the Feds have promised $1.2 billion to create renewable energy sources based on hydrogen. That's a major commitment that has attracted equally major interest from private enterprises. More than 1,000 companies had been involved in creating hydrogen fuel cells by the end of 2003, and growth continues unabated. According to researcher Freedonia Group, the total fuel cell market will reach $1.1 billion by 2008. BCC Research estimates more than 25% annual growth in portable hydrogen fuel cells.
Fortunately for investors, many of the companies pushing hydrogen-based products are public, but many are also early in their development. That's primarily a function of the nascent nature of the market and the costs involved in creating fuel cell alternatives. For example, prototype fuel-cell powered autos created by Honda (NYSE: HMC) and Toyota (NYSE: TM) could fetch $100,000 or more today. Prices are expected to come down dramatically in the next five years, creating a mass market from which today's fuel cell pioneers would see enormous benefits. Among the list of the more promising are Ballard Power (Nasdaq: BLDP), Distributed Energy Systems (Nasdaq: DESC), FuelCell Energy (Nasdaq: FCEL), Hydrogenics (Nasdaq: HYGS), and Plug Power (Nasdaq: PLUG).
Breaking wind
Wind is the most likely renewable energy source to achieve mass adoption soon because it's relatively cheap. With tax credits, wind costs between 3 and 4 cents per kWh, making it a cost-competitive alternative to generating electricity using coal or natural gas. No wonder estimates from the European Wind Energy Association say the global market could reach $150 billion by 2012. That would equal a more than 1,500% increase from $9 billion in 2003, the last full year for which wind market statistics are available.
Even if that estimate proves aggressive, local efforts to make utilities more dependent on renewable energy are sure to aid growth. Consider my home state of Colorado, for example. Last November voters approved Amendment 37, which stipulates that state utilities must generate or purchase 3% of their available electric power from renewable energy sources beginning in 2007. The requirement rises to 10% by 2015.
The amendment is expected to benefit wind power firms the most because, well, we've got an awfully windy state. Plus, Colorado has a number of ranchers who could theoretically lease portions of their land to install wind turbines. If that sounds like a far-fetched idea, consider that the next 20 years is expected to bring more construction of power-generating facilities than in the prior century.
There are lots of good reasons to be enthusiastic about wind power, but sadly there are precious few public companies in the field. Instead, GE has proven to be the dominant supplier of wind turbines. But there are smaller alternatives, including power distributor AES (NYSE: AES), which earlier this month made large investments in wind power projects in Texas, and U.S. Wind Farming, a penny stock on the pink sheets that owns majority interests in wind-generating power cooperatives in rural areas. Both could be promising, but risk abounds. For example, U.S. Wind Farming is still working on its audit and a complete set of financial statements is not yet available at its website. That makes buying shares in the company an act of faith more than an investment at this point.
....
* note author did not reference DESC w/respect to wind |
