Alternative energy gets boost from high oil
By Grant Campbell
Investor's Digest of Canada
The high cost of crude oil and other petroleum products is starting to have a trickle-down effect in other energy-related sectors. The possibility that we have seen the end of cheap crude oil has created a renewed interest in alternative forms of energy. Additional interest in alternative technology has been driven by the move to reduce green-house-gas emissions.
These twin forces have brought alternative-energy systems into the mainstream as never before, and there is now serious pressure to make these technologies effective and affordable. The process of development has been very inconsistent, and the renewed demand should help to see more investment which should lead to a much more predictable development time table.
In many cases, the launching of new technologies has been completed within the confines of the current technology, with very few, if any, really substantial break through changes being implemented. The hybrid car is an example of this where two technologies are combined to bring a new product to consumers.
Electric cars are only a viable option to reduce emissions if the electricity used to charge them is produced from a clean source. What is really required is a complete shakeup of the energy sector similar to the change from oil lamps to light bulbs. So far, the new products appear to be only reworking current products.
There has been an ongoing interest in a number of different energy systems, most of which have taken much longer to develop than many investors had expected.
The hydrogen fuel-cell industry appeared to offer the best potential for the introduction of a clean and efficient alternative to the internal combustion engine used at the moment. The main hurdle in developing the fuel cell appears to be the inability to shrink the power plant down to a reasonable size and produce enough power to enable widespread use in cars and small trucks.
Fuel-cell technology appears to be better suited for use in busses and trucks such as those produced by Ballard Power (TSX: BLD; $4.12) or in stationary back-up power situations as an alternative to diesel generators, such as those produced by Fuel Cell Energy Inc. (Nasdaq: FCEL; $7.90). Development of a smaller fuel cell designed to replace gas engines is continuing, but at this point, it is hard to say when this next breakthrough will be completed. The potential for growth in this sector will depend on the demand fro clean energy and a continued narrowing in the cost differential when compared to fossil-fuel power plants.
As petroleum products increase in price, a number of alternative energy products become more competitive. The solar-energy sector, which has been available for decades, is only now starting to get a share of the energy market as the cost of traditional energy surges.
There have been a number of major solar installations completed over the past couple of years and many more are being initiated. The recently completed Nevada Solar One (www.nevadasolarone.net) farm, which produces about 64 megawatts of power, is an example of a large, utility-size solar production facility. This is the third largest solar farm in the world. Located 40 mile southeast of Las Vegas, it covers an area of 400 acres with 300 acres of parabolic solar concentrators. The concentrators focus the solar energy on oil-filled solar receiver tubes, heating them to 735°F to produce steam to drive a conventional turbine.
The project cost $266 million, and all of the power has been sold under a long-term contract. As the prices of traditional electricity production continues to increase, solar will become a much more attractive alternative. Similar-sized solar farms are under construction in California and Texas.
Solar power offers flexible and stable opportunity to produce clean power over the long term. There have been considerable improvements in the design and production of solar panels. The ongoing search for increased efficiency will enhance the viability of solar panels as a consistent, clean and reliable source of power.
Evergreen Solar Inc. (Nasdaq: ESLR; $9.15) manufactures photovoltaic solar panels which contain poly-crystalline silicon solar cells. Each can produce up to 300 watts and is designed to be connected in series to meet a variety of requirements. The company has offices in both the U.S. and Germany.
Canadian Solar Inc. (Nasdaq: CSIQ; $47.55) is a Canadian based producer of photovoltaic solar panels capable of producing up to 300 watts each. The company has offices in Ontario, Arizona, Germany and China. Canadian Solar also operates one of the world's largest silicon-reclaiming facilities and is considered one of the leaders in this technology.
The global energy markets are positioned to offer increased benefits to a wide variety of alternative energy products. The surge in prices of traditional energy has opened up the sector to other previously uneconomic products. The long-term trend favors the expedited development of new, clean and reliable technology on a scale previously unheard of.
Editor's Note: Grant Campbell of Cowichan Bay, B.C., publishes the Internet newsletter campbellreport.com, and is a regular contributor to Investor's Digest of Canada, 133 Richmond St W., Toronto, ON M5H 3M8, 1 year, 24 issues, $137.
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