NEW ENERGY – SCARRED, STILL DREAMING THE DREAM

Preface: President-elect Obama's remark on 60 minutes that it is right now more important than ever to move forward with plans to grow New Energy, build a Green New Deal and free the nation from its energy-dependent flailings, despite plunging oil prices, shows a wisdom and insight not seen in U.S. leadership in many a day.

Nevertheless, shifts in costs associated with the onrusing recession are giving fossil fools the opportunity to once again raise their rant about New Energy not being viable without subsidies.

Guess what: Fossil fuels are not viable without subsidies either. In fact, fossil fuels can’t compete WITH subsidies.

Oil, coal and nuclear companies get many and generous tax breaks and protections from the harms they cause from the governments of developed nations. Subsidies and incentives to New Energy are barely beginning to compare.

Nevertheless, the International Energy Agency expects New Energy to pass natural gas and become the world’s 2nd biggest source of electricity generation by the middle of the 2nd decade of this century. Only coal, an entrenched industry with a 200-year head start that now does as much harm as it does good, remains to be taken down.

IEA: "Excluding biomass, non-hydro renewable energy sources - Wind, solar, geothermal, tide and wave energy - together grow faster than any other source worldwide, at an average rate of 7.2 percent per year over the projection period…" (see NEW ENERGY TO PASS GAS)

New Energy’s era is now. It is no longer the impossible dream.

None of this, however, means that New Energy – along with every other sector of the world’s economy – isn’t struggling.

The struggle comes as a surprise to those who expected passage of New Energy’s tax credits (as part of the October financial rescue package) to lock down the New Energy boom.

New Energy projects, though, require capital, and capital is hard to come by these days. The tax credits would have attracted funding from investors like Lehman Brothers, Wachovia and AIG, all formerly big bettors on New Energy, but they are now without chips to ante up.

A shake-out is inevitable.

Things are so tough that billionaire energy entrepreneur T. Boone Pickens had to put his 4,000 megawatt Texas wind farm on hold and cut $10 million from his wind-and-natural gas ad campaign.

But the investment opportunity for those with money to bet over the long haul, like pension funds and non-profit organizations, is still in New Energy.

The returns will come sooner if sector leaders can get Congress to tweak the tax credits (making them refundable) in the year-ending lame duck session.

Rhone Resch, President, Solar Energy Industries Association: "It's just that the economics are just not there with respect to financing. If you free that up [by making the tax credits refundable], you'll see record growth for solar in particular in the United States in 2009…"

With an adjustment to the tax credits, New Energy’s recovery could come much sooner than most expect the economy overall to recover.

In the shake-out process, the losers will be companies that require big capital and can’t get it. One kind of winner will, of course, be the companies that find new sources of funding.

Another kind of winner will be companies that streamline energy use. From better battery technology to software for a smarter grid to simple thermostats that help business and homeowners lower consumption by just showing them more clearly what they are consuming, efficiency is as kingly as capital. Venture capitalists are scouring the bushes for anybody who can maximize it.

Eventually, New Energy is inevitable. The administration coming into Washington, D.C., is one of its greatest proponents.

By the time this group of power brokers gets its sites fixed, the New Energy sector will be a leaner, meaner machine, scarred but still dreaming the dream.

Joseph Muscat, Americas director of cleantech and venture capital, Ernst & Young: "We are at a very unique moment where I think with a new administration ... one of their top priorities is a comprehensive strategy…I think we'll see all of those elements of electricity generation solar, hydro, wind all of those being a part of the solution."

click to enlarge

Renewable energy may end up scarred, but stronger
Sandy Shore, November 13, 2008 (AP via Forbes)

WHO
International Energy Agency (IEA); T. Boone Pickens; Rhone Resch, President, Solar Energy Industries Association (SEIA); Joseph Muscat, Americas director of cleantech and venture capital, Ernst & Young; BP Solar; Yingli Green Energy Holding Co.

WHAT
New Energy, poised to leap forward after passage of a package of incentives, faces a credit crisis and a recession but the resultant shake-out could be good for it.

Tools that develop the "smart grid" will be big. (click to enlarge)

WHEN
- Most energy experts expect 2008 Q4 to be worse than Q3.
- IEA predicts New Energy will be the 2nd biggest source of world electricity generation by 2015.
- All 4 Qs, 2007: $2.6 billion in U.S. venture capital investment
- Q1-3 2008: $3.3 billion in U.S. venture capital investment

WHERE
- In the New Energy sector, the financial crisis, credit freeze and recession will produce a shake-out.
- BP Solar is based in Fredriksburg. Md.
- Yingli Green Energy Holding Co. is based in China.
- Boone Pickens’ huge wind installation will be in the Texas panhandle.

WHY
- World venture capital and private equity investment fell 24% from its 2Q 2008 level of $5.8 billion.
- Retail gas pump prices fell 32% and are now less than $2/gallon in some states.
- T. Boone Pickens put on hold his plan to develop a 4,000 megawatt wind installatin in
Texas due to the fall in natural gas prices.
- BP Solar cancelled the planned $97 million expansion of its Frederick, Md., solar panem manufacturing plant due to global competition.
- A number of biofuel operations, including VeraSun, the 2nd biggest ethanol company in the U.S., have gone or are on the verge of going bankruptcy.
- The growth of Yingli Green Energy Holding Co., China’s once seemingly unstoppable solar manufacturer, has ended with the announcement it will not expand beyond present plans.
- Some say the downturn and associated fall in fossil fuel prices make New Energy more expensive than traditional sources of power generation.
- Experts expect the next New Energy growth to come in efficiency products.

Tools to make houses smarter will be bigger. (click to enlarge)

QUOTES
Joseph Muscat, Americas director of cleantech and venture capital, Ernst & Young: "We're in a moment now where people are taking a deep breath and really challenging their business models and really making sure that they'll be able to sort of weather the storm…I think we need confidence to return to the overall markets. People have to get a perspective on what will this recession look like…"

The section of the interview quoted is in the last minute of this video. From iphoneprankster via YouTube.