MONEY, RISK COME TO NEW ENERGY

Historically, drops in energy prices have been tied to imbalances in supply and demand. Either overproduction creates excess supply or economic downturns lead to drop-offs in demand. Due to the voracious energy appetites of emerging world markets, neither scenario seems likely in today's marketplace. Anybody with energy to sell will be very popular for the foreseeable future.

Capital flows into clean energy
August 30, 2007 (Dow Jones Newswires/AP via The Cleveland Plain Dealer)

WHO
Energy analysts and investors

Admittedly, the S & P has been on a bumpy ride lately. And real estate has made that look good... (click to enlarge)

WHAT
New Energy investments still look good to most analysts but cautionary words are being heard as the overall market falters.

WHEN
Short term investing has 2 features, enthusiasm for clean-tech versus doubt about the larger market

...but New Energy has a pretty good groove on...(click to enlarge)

WHERE
Venture capital is expected to continue flowing into solar, wind and biofuel but corn ethanol plays are beginning to raise doubts because the impact of high fuel prices is not enough to offset rising commodity costs.

WHY
- Overall enthusiasm for New Energy are undercut by doubts only about fossil fuel prices. A drop there (NewEnergyNews: dubious) could leave New Energy costs non-competitive.
- D.C. political infighting could result in congressional failure to adequately incentivize New Energy, resulting in the slowing of growth.
- Demand for silicon could keep solar energy costs too high.
- Demand for turbines could retard wind and wave energy development.
- Hesitation on climate change action, which may not be finalized until after the 2008 presidential election, could keep investors away.

QUOTES
- Dan Pullman, vp, investment bank McNamee Lawrence & Co.: "Every area has momentum right now…You see it solar. You see it wind, alternative transportation, fuels and plug-in vehicles."

...and a pretty good inventory. (click to enlarge)

- Michael Carboy, clean-energy analyst, Signal Hill: "The appeal of the sector has nothing to do with market valuation. It has everything to do with demand drivers on the national political and economic and global levels…We have a need to more efficiently use energy and get more energy from renewable sources. Those don't change based on market valuation. Corrections are an opportunity to look at names thought of as too expensive in the past."
- Carboy on corn ethanol: "You're playing the spread between the commodity market and the energy market…It's a dangerous game."
- Jeffrey Saut, Raymond James market strategist, on solar: "If you bet the farm, you better have two farms…Despite what the clean-tech people will tell you, if crude oil goes down, the price of anything related to alternative energy comes down with it.
Most don't stand on their own feet without high energy prices or without government tax benefits."