Monday’s WSJ.com carries a multi-part feature on what it terms the “environmental goldrush”. As we have argued in prior posts, the rapid proliferation in global energy demand and climate change is percipitating one of the most fundamental structural shifts in economic history. The opportunities are unprecedented, but so are the dangers to existing firms that are slow to adapt (also see Stuart Hart’s excellent book Capitalism at the Crossroads).
What’s most impressive here is how readily the august (and right-leaning) Journal recognizes the scope of this economic transformation. Author Jeffrey Ball goes so far as to call it a “tectonic shift”. The message to the “old energy establishment” is clear - innovate or die!
“From Capitol Hill to California and Brussels to Beijing, multinational companies are stepping up their lobbying and tweaking their product lines… New companies — even new industries — are challenging the established giants to exploit a growing market for everything from green cars to green fuels. The prospect of carbon caps threatens every company whose business depends on burning energy — that is, virtually every multinational corporation on the planet. Auto makers, oil producers, utilities, chemical producers — all the stalwarts of the fossil-fueled age are in for a potential hit. So are those that feed off them: banks, insurance companies and individual investors.”
About as good a case for green investing as I’ve heard… However, Mr. Ball goes on to make some surprising observations, which might help you structure your portfolio of green investments. Alternately, they might just make you decide to purchase real estate on Mars.
1. According to the IEA (International Energy Agency), even the most optimistic projections point to a very slow adoption of renewable energy sources worldwide. Even with aggressive government subsidies in place, by 2030 renewables (wind, solar, geothermal, wave, and tidal) are expected to account for a mere 2.4% of global energy consumption, while fossil fuels (oil, coal, and gas) retain a 77% share (down from 80% in 2004).
2. During that same period, 2004-2030, global carbon emissions, driven by rapid economic growth in developing nations, are expected to rise between 30% and 50%, depending on the policies governments choose to adopt. Al Gore - where are you?
3. For the “glass-half-full” types among us… While renewables’ share of global energy mix will only reach 2.4% by 2030, that still represents aFIVE-FOLD increase over 2004. Clearly, the investment opportunity IS there!
4. Led by Horizon Wind Energy (which was recently sold by Goldman Sachs for $21.5B to a Portugese firm), the state of Texas is apparently becoming the new epicenter of wind power generation in the U.S, with over 3500MW of capacity.
5. In the solar arena, Ball notes that Japan’s Sharp Corporation and Germany’s Q-Cells AG are being surpassed by Chinese firms, such as Suntech Power, which enjoy lower costs. First Solar isn’t in China - rather in Phoenix, but it’s making an important play in photovoltaic thin films. Finally, MMA Renewables is building America’s largest solar plant - a 15MW facility at Nevada’s Nellis AFB.
6. In light of the long projected time horizon for transition to renewables, strong areas of opportunity lie in the areas of energy efficiency and GHG mitigation. The article mentions technologies developed by Waste Management for sequestration of the potent GHG Methane.
