2009 IN NEW ENERGY (ACCORDING TO FORBES)

The experts don’t seem to know what to make of the situation. They have rarely been less unanimous. Predictions for 2009 are all over the map from optimistic to dismal.

Almost nobody really knows how 2009 will go because few know how much poison is still left in the broad economy, from bank assets to mortgages.

The prestigious business periodical Forbes’ prediction on New Energy comes from journalist Jonathan Fahey.

Fahey accurately reports the Obama administration has given every indication it is firmly committed to investing in New Energy as a means of driving economy-wide growth but doesn’t think the President-elect has it right.

Fahey: “The misplaced assumption [is that] the new administration's green jobs stimulus will suddenly unleash a torrent of miracles that will make cellulosic ethanol economic, make coal clean and create batteries that can power an SUV across the country on a single charge. What's needed for advances like these is basic science and time. This isn't like building a bridge or a highway; muscle won't do it…”

Like so many in the conservative business community for whom Forbes’ pronunciations are apocryphal, the whole perspective is skewed. It's not about cellulosic ethanol or clean coal and the batteries needed to make battery-electric vehicles (BEVs) a reality are already available.

The Obama administration’s stimulus money will likely go to creating a massive Energy Efficiency sector, to building wind, solar, geothermal and hydrokinetic energies to supply the grid and to restructuring the auto industries for the building of a BEV transportation fleet.

It is too soon to be sure, but it appears little will go to "clean" coal except research until coal proves it can really be clean. The cellulosic ethanol people know they have yet to prove fuel can be produced at an economy-sized scale.

One thing about building the New Energy economy that Fahey gets right is how hard it will be.

Fahey: “This isn't even like putting a man on the moon or building the first atomic bomb. It's much harder.”

Exactly. It will be like a war effort, a very long term commitment involving the concerted effort of the entire nation. It will be a chance for the underachieving post-World War II baby boom generation to step up and achieve a bit of its parents’ generation’s greatness.

That’s why the new administration will begin with a concrete national energy policy and the establishment of stable, long-term goals and incentives. Such certainty reduces risk and invites all the money now sitting on the sidelines to get involved.

Predictions are hard but even Fahey agrees it is highly likely the Obama administration’s commitment will be quickly met with commitments from a lot of big money players. There is every reason to believe a national effort can follow.

A little leadership goes a long way. Especially when the experts don’t know what to make of the situation.

click to enlarge

Jonathan Fahey On Alternative Energy
Jonathan Fahey, December 19, 2008 (Forbes)

WHO
The incoming Obama administration; New Energy companies; OPEC and oil-producing nations (Venezuela, Iran, Russia); Solar power companies (First Solar, Daystar Technologies, Suntech Power, Real Goods Solar, Akeena Solar); Big traditional-energy companies and utilities

WHAT
2009 will be different than 2008. Very different.

The world has barely begun to put to use its New Energy resources. Sooner or later, they will make somebody a LOT of money. (click to enlarge)

WHEN
- Shakeout time.
- Factors will shift as the effects driving conditions are offset by federal policy action and stimulus investments.
- When the U.S. had no overarching energy policy, the big players held back. When the incoming administration commits itself, so will big traditional-energy companies and utilities.

WHERE
- OPEC production cuts will not be sustained as member countries pursue their own cash flows.
- Stimulus package funds could drive very big projects like installing solar in all federal buildings, revamping the national transmission grid or even building wind on the scale of World War II’s rebuilding of the Air Force.

WHY
- New Energy (short run) faces competition from cheap oil and gas but (long run) will profit from favorable polices, subsidies, stimulus money and projects. The changes will make wise planning very difficult for producers and investors.
- Despite low prices, oil will lose global demand of 450,000 barrels/day and be closer to $25/barrel than $75.
- Big energy infrastructure projects could dramatically boost the solar, wind, geothermal and hydrokinetic energy companies whose industries get incentivized and subsidized.
- A concrete federal energy policy backed up by stable, long-term incentives eliminate risk and invite big players.

There is a remarkable array of opportunities across every sector of the economy. Anything could happen once the money starts flowing. (click to enlarge)

QUOTES
- Fahey, Forbes: “Solar panel inventory is high, and silicon costs have plummeted, intensifying a battle for lowest costs per watt that some won't live through. But the ones that do could thrive if, say, one of Obama's green jobs initiatives involves covering government buildings--or all of Greater Phoenix--in solar panels.”
- Fahey, Forbes: “…in a capital-constrained world, the relatively robust balance sheets of utilities and energy companies (even as they themselves navigate uncertain times) will be strong enough to snap up weakened alternative-energy companies and undervalued technologies. They are ready to pounce. And pounce they will.”