Energy: Power Woes Make Firms Attractive
Investment Opportunities
California’s continuing electricity crisis makes this a good time to invest in alternative energy companies, but investors need to study the investment opportunities closely before plunking down their money.
So said speakers at the Alternative Energy for the Investor conference, held June 21-22 in San Diego. The session was intended as a way to acquaint potential investors with the new technology.
William Golove, energy analyst with Ernest Orlando Lawrence Berkeley National Laboratory, predicted that the next few years would see increased interest in renewable energy. In the past few years, the price for renewables has fallen at the same time that the price for conventional energy has shot up, he said.
Even though the cost for electricity has plummeted since the beginning of the year, that fact hasn’t changed, Golove said.
“(Conventional power is still) double or more the price it was 14 months ago. Because it was eight times as high, we’re all thrilled that it’s now only two times as high,” he said.
That means wind power, at a fixed cost of 5 or 5 & #733; cents a kilowatt hour, becomes more attractive when compared against conventional power, now at 6 & #733; cents, Golove said.
Also, the 6 & #733;-cent price is only the average price for a commodity that is very volatile throughout the day. Electricity bought in the wholesale market during peak hours is much more expensive than non-peak electricity , as high as 25 cents or even 75 cents, he said.
That has helped push municipal utilities and others toward green power, Golove said.
“They have to buy, potentially, on the spot market, so they’re exposed to this difference through the wholesale market,” he said. “For entities that are on limited budgets, and have a high need for predictability renewable energy offers significant benefits to respond to these changing conditions.”
Golove said peak times are between the hours of noon and 6 p.m. , a time when photovoltaic cells are most efficient at putting out electricity. That energy comes at a constant price which compares favorably against conventional power, he said.
Still another driver helping push interest in renewables is emissions standards. If the state or federal government imposes stricter standards on emissions of carbon dioxide and other greenhouse gases, the price of conventional fuels will rise even higher, Golove said.
Currently, however, solar power is competitive only because it gets subsidies from the state and federal governments. Wind power and geothermal remain the most viable technology currently, he said.
Eli Lustgarten, managing director of Boston-based investment research firm H.C. Wainwright & Co., Inc., agreed there are plenty of opportunities in alternative energy. However, the current interest in alternate energy is almost a fad, similar to the dot-com bubble which burst last year, he said.
“If you look at the charts of several of the alternative energy stocks, some of them show the investment characteristics of the dot-com area already. If you look at the peak level that these stocks had (in) March of 2000, there are dramatic declines that many companies have already undergone,” he said.
