"To say that alternative energies are critical is a severe understatement." asserts Stephen Leeb, who looks at three plays in the sector that earn a spot in his Growth Portfolio.
The editor of The Complete Investor explains, "Readily scalable energy sources such as solar and wind account for under 1%. It's time to get serious."
Three of the stocks he has selected are holdings in his model Growth Portfolio: FPL Group (NYSE: FPL), Exelon (NYSE: EXC), and General Electric (NYSE: GE). Here's a trio of favorites.
"We have focused on those alternative energy stocks with the strongest growth profiles. None is a pie in the sky fantasy; all provide energy in the here and now and have significant and fast-growing revenue streams.
"The fact that their growth should continue to burgeon is one of the most heartening pieces of news on the energy front. We could argue that investing in these stocks not only will be good for your portfolio but is an act of patriotism as well.
That the developing and developed world will need considerably more electricity in the decades ahead would not surprise most investors / readers.
That both economic zones can achieve this goal while adding a minimal amount of soot to the atmosphere, however, would.
And the technology that will undoubtedly serve as a key energy-generation component in emerging markets' 21st century power grid? You guessed it: nuclear power -- the power generation form that has lagged in the United States for more than 20 years, due to environmental regulations.
China, India push forward with plant plans
China and India are two emerging market nations that recognize that nuclear power is an essential part of meeting future electricity demand. Nuclear power will account for more than 5% of China's power output by 2020, Bloomberg News reported Monday. Meanwhile, India will start three nuclear reactors this year.
Economist Glen Langan said that while nuclear power is not, strictly speaking, a renewable energy, it has to be considered as part of the next-generation energy mix [along with wind and solar power] to meet the U.S.'s growing demand for electricity.
Almost on cue, following oil's $12 rise in two days to $134, the International Energy Agency said the world needs to invest an additional $45 trillion in the decades ahead to vastly expand both nuclear power and wind power capacity to meet global energy needs.
Strictly speaking, the IEA's call to action was rooted in reducing the world's greenhouse gas emissions and achieving what it argues will be "a clean, clever, energy future" and not to move away from oil or fossil fuels solely on cost grounds. (pdf)
Still, the report's 2050 ETP Baseline scenario projects that CO2 emissions will rise by 130% and oil demand will rise by 70% - - the latter total being equal to five times Saudi Arabia's current oil production. If the IEA's oil projection is correct, that would suggest additional large increases in the price of oil in the decades ahead - - on top of oil's more than 400% price rise since 2001.
USA Today reports that oil billionaire T. Boone Pickens is placing a $2 billion bet on wind power. Pickens' Mesa Power plans to build the Pampa Wind Project in the Texas Panhandle. It will eventually cover 400,000 acres and generate enough power for more than 1.3 million homes -- making it the largest wind farm in the world.
And Pickens is helping General Electric Company (NYSE: GE) in the bargain. That's because he's buying GE turbine technology. GE is expected to deliver 667, 1.5-megawatt wind turbines in 2010 and 2011. Jeffrey Immelt, GE Chairman and CEO said, "As America's demand for energy escalates, it is clear that wind can and will play a bigger part in meeting that need. We're excited to partner with an energy visionary like T. Boone Pickens to bring our wind technology to the marketplace."
With oil hitting $127 a barrel, I hope this project is the first of many. It will take many different sources of alternative energy to reduce U.S. demand for black gold. Wind power is certainly a good alternative. And if Pickens and GE get richer in the process, that's fine by me.
The rise in commodity prices is set to complicate the growth plans for yet another sector.
Projected costs for a new generation of nuclear power plants on the drawing boards are increasing at an enormous rate -- in some cases double to quadruple their earlier, rough estimates - - The Wall Street Journal reported Monday(subscription required).
Further, that new generation of nuclear power plants has emerged as an important component of the United States' future energy supply, due to $100-plus oil and the technology's superiority to high-pollution, coal-fired energy plants, The Journal reported Monday. However, surging costs for cement, steel, and copper, among other factors, have caused nuclear plant construction costs to soar to $5-$12 billion -- a trend that could lead to delayed or canceled projects.
Rising energy costs
Economist Peter Dawson told BloggingStocks Monday what investors should take away from the rising nuclear plant cost phenomenon is not so much a comparison of the positives/negatives of each energy technology, but the rising cost of energy, across all platforms, in general.
General Electric and Vestas Wind Systems are reaping the benefits as U.S. utilities assertively add generating capacity from renewable/alternative energy sources, Bloomberg News reported Wednesday.
For example, XCel Energy (NYSE: XEL), the U.S.'s largest provider of wind power, is buying 67 General Electric (NYSE: GE) turbines for a Minnesota wind farm, and GE expects its turbine sales to increase 25% to $6 billion this year, Bloomberg News reported. GE was the largest supplier of wind turbines in 2007, with a 45% market share. Siemens AG (NYSE: SI) and Vestas are two other major global manufacturers of wind turbines that should continue to benefit as wind power usage increases: each is opening manufacturing plants in the U.S. to accommodate increased wind energy-related sales.
GE's shares gained 89 cents to $34.29, while Siemens AG rose 20 cents to $128.20 in Wednesday afternoon trading.
"With oil over $100, and voters increasingly attuned in this political season to the need for clean and renewable fuels, the alternative energy industry is ripe for investment," says David Sandell.
"American Superconductor designs and sells products geared to utilities, industrial companies, and wind energy developers. Its offers are designed to help these customers to generate and deliver electrical power more efficiently, cleanly, and reliably.
"The company has two chief divisions. Its profitable Power Systems segment sells power converters to utilities and industrial customers, both in the U.S. and internationally. The point of these converters is to regulate voltage, thereby improving the performance of the electric grid – making it more efficient (and energy-conserving) as well as reliable.
"The company is teaming up with the Department of Homeland Security as well as with Con Edison on a grid upgrade for New York City that would increase capacity and suppress power surges.
"In 2007, beefing up this division, American Superconductor made two significant acquisitions. It bought Windtec, a company that specializes in wind energy – licensing proprietary wind turbine designs, training workers to maintain turbines, and supplying converter and control systems to wind farms.
"Despite the recent economic slowdown, Hexcel (NYSE: HXL) is seeing its market for carbon-fiber-based aerospace products and parts boom," says energy sector expert Elliott Gue.
The contributing editor to Personal Finance explains, "And in addition to growing aerospace demand, the firm has growing markets in wind power and nuclear power." Here is his review.
"Hexcel makes lightweight carbon-fiber parts used on modern aircraft designs. New aircraft designs such as the 787 incorporate far higher carbon-fiber content than older planes, so Hexcel is becoming an increasingly important supplier.
"The aerospace demand cycle isn't directly tied to demand for air travel. Airlines and aircraft leasing firms typically plan their purchases of new planes many years in advance; the aerospace cycle is highly visible and longer-term in nature.
"Currently, demand for modern fuel-efficient aircraft such as the 787 Dreamliner from Boeing (NYSE: BA) is booming. Hexcel recently reported fourth quarter results and offered management's outlook for the year ahead. Just over 50% of the company's total sales come from the commercial aerospace market.
"The market is booming: Sales surged more than 21% compared to the fourth quarter of 2006 in constant dollar terms. Hexcel sells to both Airbus and Boeing which have a combined acklog of nearly 7,000 planes that have been ordered but not yet delivered.
The oil market, to put it diplomatically, has not provided a great deal of encouragement lately for policy makers attempting to stimulate U.S. economic growth.
Further, time was when an $80 or $85 price would be considered unreasonably high, or even outlandish. But given oil's breakthrough and close above key, psychological resistance of $100 per barrel this week, $80 looks almost like an acceptable price.
Moreover, oil mogul and billionaire T. Boone Pickens says we may get there. Providing a ray of light for concerned business executives, consumers and public officials, Pickens, who accurately predicted oil's rise to $100 per barrel, told CNBC Thursday oil should drop $10-15 in the second quarter of 2008.
"I think oil's going to back off," Pickens said during the interview. "The weakest quarter is the second quarter. We'll drop $10 or $15 a barrel in the second quarter. I think we'll be back above $100 in the second half of the year."
"Alternatives may not be an important source of electricity, but they are the fastest-growing subsector in the energy space," says energy sector expert Elliott Gue in Personal Finance. Here, he looks at wind power.
"The US Energy Information Administration (EIA) projects that wind power will grow by more than 7%, encouraged by generous government subsidies. Compare that to just 1.5% annualized projected growth in total electricity demand.
"The world's largest wind turbine producer, Vestas Wind Systems (OTC: VWSYF), fell on hard times back in 2005. It priced some of its turbines too aggressively and saw a surge in warranty claims because of defective components.
"But the stock appears back on track. Warranty provisions are down to 5% of revenues. Profit margins surged 4 percentage points year-over-year because of more rational turbine pricing. Vestas' current backlog stands at EUR4.1 billion (US $6.03 billion), up more than 30% year-over-year.
The odds of a 2007 Energy Bill passing the Democratic Party-led U.S. Congress, with President Bush's blessing, "Are still likely," according to a Washington-based, public policy lobbyist with knowledge of the matter.
"The bill will need a few revisions, but I'd say it's a 70/30 go, in favor of the bill being signed by the president," the lobbyist told Bloggingstocks Tuesday, on condition he not be identified by name.
The lobbyist, who represents primarily Democratic Party-based constituencies, said the the bill's renewable energy component and potential tax increases remain the hangups in the bill.
Modification likely
"More than likely President Bush will get the renewable energy component modified, but the Democrats may gain extra footing with better solar/wind energy credits," he said.
The bill current would require utilities to generate more power from renewable energy. Lawmakers from the Southeast U.S. have said they're concerned that utilities in their states will not be able to meet the requirement, due to a lack of wind power, The Wall Street Journal reported.
Want to hear about one bright spot on the energy horizon? It's natural gas, for now, at least.
While oil's price has soared in 2007, natural gas' price has actually declined -- you heard that right, declined -- in 2007, from $8.90 / million btu on Dec. 31 2006 to $7.93 / million btu as of Nov. 12, 2007.
In fact, on a per energy unit basis - - or how much energy one can buy for a $1 - - natural gas is about half the price of oil. That's good news for utilities that operate natural gas-fired electric generation plants and homeowners who heat by gas. The situation represents an energy-sector turnabout, of sorts: in 2005, scarce gas supplies and a cold winter caused natural gas prices to spike well above the energy-equivalent price for oil. Homeowners who heated by gas - - most of whom could not switch quickly to another energy form - - were hit especially hard that year.
What's driving the oil/natural gas energy split? Independent Energy Trader Jim Dietz told BloggingsStocks that natural gas' lack of portability is a big factor. Unlike oil, natural gas isn't transported from hemisphere-to-hemisphere the way oil is: i..e. oil can go wherever the global market says the price is highest, Dietz said. Natural gas is consumed regionally. Hence, when regional demand is high, "that leads to quicker price rises for natural gas, but also when demand drops, quicker price reductions," he said. The latter is the case now, he said.
Dietz cautions that a hot summer in the U.S. could quickly reverse the current trend, so homeowners "should not consider natural gas the permanent energy winner, when deciding to heat by natural gas or oil, if they have the choice." "Solar, wind, the home's efficiency rating, and the availability of an energy form in your area of the country" should also be considered, Dietz added.
GE will fund a wind farming project in Hawaii under its unit GE Energy Financial Services. GE maintains that renewable energy is an essential component of the "world energy mix." I stumbled across GE's in-house Global Research blog. According to a post written early this year, the company claimed that since obtaining "Enron's wind turbine assets in 2002, GE has presided over significant growth in this business." Around the same time, the independently-run EnergyBlognoted that "wind energy costs drop below conventional sources in some markets."
Ge will supply 14 of its 1.5-MW wind turbines which will be place at the south tip of the big island. Project managers estimate the farm will produce energy equivalent to power 10,000 homes.
Interested in investing in wind power? Whether it's because you see that the demand is forecast to double within 3 years for wind turbines, or because you're trying to encourage more wind use for personal reasons, how can you go about this?
Kevin Kelleher of The Street points out that it's tough for US investors to find companies that are all about wind power to make the investment. He names some companies you can invest in, but includes GE as one way you could invest in wind power.
1.5% of GE's income last year was through wind power sales. That's $1 billion in sales, hardly a drop in the bucket. Kelleher's other choices are sketchy at best, with US Wind Farming not making any revenue, and Western Wind Energy being in legal trouble.
GE offers the odd benefit of being able to invest in a blue chip company, stable with paying dividends, as well as investing in the future of alternative energy sector that GE is driving and trying to grow. A stock pick for both conscience and safe stock play? That's got to be attractive to some types of investors. Furthermore, GE is clearly a leader in this technology and market, so if you're interested in wind power, a look closer a GE is worth it.
GE closed today at $34.22, down 44 cents. Again, many suspect this is thanks to interest rate worries. Meanwhile GE's Ecomagination reeled in a positive result for the company: GE announced today several wind turbine sales to LA and Hawaii.
GE Energy sold 80 turbines to the Los Angeles Department of Water and Power, and in the right, gusty conditions, they're all capable of pumping out 1.5 megawatts of power each They'll be installed near Mojave, 110 miles north of LA. The Hawaii deal is not as big, with only 14 of these wind turbines sold, but that still makes almost 100 wind turbines added to the board for GE's Energy division. Not a bad day for renewable energy.
Almost on cue, following 
General Electric and Vestas Wind Systems are reaping the benefits as U.S. utilities assertively add generating capacity from renewable/alternative energy sources, 
The oil market, to put it diplomatically, has not provided a great deal of encouragement lately for policy makers attempting to stimulate U.S. economic growth.
Interested in investing in wind power? Whether it's because you see that the demand is forecast to double within 3 years for wind turbines, or because you're trying to encourage more wind use for personal reasons, how can you go about this?
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