On Wednesday, Cramer at TheStreet.com inherited some wind stocks for us. The article begins by claiming that Cramer is a “longtime bull of the wind power business.” I’m not sure what ‘long-term’ means for Cramer, but in January 2007 the extent of his knowledge on Energy Conversion Devices (NASDAQ:ENER), which is not a wind play but is nonetheless a good proxy for understanding of the alt energy sector overall, was that since oil prices were expected to trend down the stock was a “sell! sell! sell!”, presumably because there was nothing more to this company than oil prices…oups…But I digress. This is actually an interesting piece and I like the building of the wind turbine from scratch concept. He’s unfortunately missing a key piece of the value chain: the companies that are building and operating wind parks. But as a longtime expert of this market, I’m sure he’s got that covered elsewhere. On Thursday, Kent Croft told us on The Street TV (video) that he was plugging into power for us. A quick discussion on four plays on the US electricity grid. On Thursday, Ken Schachter at Red Herring told us that energy storage was the next big thing. Notice in the latter part of the article how the biggest thing of the next big thing is bulk storage for utilities, a topic that is right up there with increased grid efficiency. On Friday, HardAssetInvestor saw the light for us. An interesting piece discussing one area of opportunity related to the grid: direct current/alternating current and electricity transmission. The company discussed in this article, ABB (NYSE:ABB), was recommended by our own Tom Konrad last July and is up 30% since he made that call. On Friday, Matthew L. Wald at the NYT informed us that mounting costs would slow the push for clean coal. On Wednesday, we reported on a recent study claiming that the costs of building power generation facilities were shooting up. If the capital costs of building conventional power generation are rising, and if operating costs are also growing because of higher fuel prices, then it’s not surprising that a technology whose environmental effectiveness is unclear at best but that is certain to raise both capital and operating costs ends up falling by the wayside. I think great gains can be achieved relatively cheaply through efficiency, but by-and-large dealing with the negative externalities created by fossil fuels is going to be a negative -sum game, meaning that having your cake and eating too might not be an option.
From the 6/16 edition of Forbes
Windbags
Politicians these days, especially Senators Obama and Clinton, routinely bash the oil companies and call for more efforts to come up with cleaner alternative fuels. But it turns out that, as with most political rhetoric, this is easier said than done.
One favorite energy alternative loved by greenies is windmills. The problem is that these things kill birds by the thousands. One notorious example is a wind farm in Altamont Pass, Calif. In their 27-year lifetime these wind turbines have dealt a grizzly end to upward of 130,000 birds. And these aren’t just plain, everyday birds. For example, between 75 and 116 golden eagles are sliced to death each year. H. Sterling Burnett, a senior fellow at the National Center for Policy Analysis, points out a basic conflict: Wind farms have to be places the winds blow steadily, which often also happen to be areas favored by raptors and migratory birds.
Problems with the use of corn ethanol, another energy- alternative favorite, are also becoming more widely recognized. The energy needed to produce a gallon of corn-based ethanol can exceed the energy generated by the ethanol itself. Last year U.S. farmers planted more corn and fewer soybeans. To take up the slack, Brazilian farmers are clearing more of the Amazonian rain forest to plant soybeans. Those global-warming worriers are acknowledging that many biofuels ultimately result in more carbon dioxide wafting into the atmosphere. Nevertheless, many environmentalists fiercely resist any moves to ease arbitrary, prohibitive barriers to the construction of the best non-carbon-dioxide-producing energy source of all: nuclear power plants
David:
With regards to birds getting caught in wind turbines, I can’t claim to be an expert on that topic. What I do know is that this risk can be mitigated, at least partly. If I had to guess, I would say that habitat destruction, such as swamps being turned into sea-side condos, pose a far greater long-term threat to migratory bird populations than do wind farms.
On the corn ethanol topic, if you read through this site you will realize that we are generally quite skeptical about this initiative, when we are not downright opposed to it. The long-term future of transportation does not rest with liquid fuels, in my view.
With regards to nuclear, over a century of managing electrical grids should have taught us that a diversified supply base is better than a less diversified one. I agree that nuclear has to form part of our future supply mix because of its low-carbon nature. But it is far from a silver bullet and anyone claiming that nuclear will solve all of our energy challenges is poorly informed.
For one thing, nuclear, like fossil-fired generation, relies on a feedstock that is in finite supply. Second, if the entire world were to turn to nuclear tomorrow (or the entire US), the capital costs of building nuclear plants would shoot through the roof and the economics would no longer make sense. Lastly, the waste issue still hasn’t been resolved.