With crude oil continuing to trade at stratospheric prices, conflicts in the Middle East not showing any signs of abatement, and fears of climate change spreading, the alternative energy boom presses on. While each segment of the industry has begun to carve out its respective niche in the marketplace, we are nevertheless reminded that the potential of this space is still largely untapped. Indeed, the outlook for investors in this sector is rosy, and it is hardly too late to get on board.
Centralized power generation, e.g. electricity from utilities, is one such market niche that can be addressed with new technologies, as stationary power is responsible for 30% of U.S. greenhouse gas (GHG) emissions. Many utilities have already gotten on board with finding ways to offset their carbon footprints. This can be accomplished in a variety of ways, including carbon sequestration techniques and wind-generated electricity. We can only hope that such technologies continue to gain momentum in the marketplace, as the battle has only begun.
A somewhat controversial method of reducing emissions is via clean coal technology. When performed effectively, it can virtually eradicate all traces of smog-producing sulfur dioxide, a harmful gas that has long been the Achilles heel of the utility sector. Companies such as Fuel Tech (FTEK) have produced air pollution control systems that can also reduce the NOx emissions from a utility or industrial application.
Still, the problem of reducing global warming's real culprit, CO2, is not mitigated. Carbon sequestration is developing technology that can accomplish that, where CO2 molecules are removed from the resulting emissions stream and sequestered deep into the earth. This technology could be a medium-term solution, as the CO2 would then start the long process of becoming fossilized again and would be prevented from entering the atmosphere. However, this technology is not yet commercially available due to high economic costs. Additionally, renowned Australian scientist Tim Flannery argues that there is only a finite amount of space under the Earth's surface where we can dump this excess carbon. Should sequestration technologies become commercialized, we will run the risk of quickly using up all of the available carbon sinks.
FutureGen, a next-generation power plant that is still in development stages, will take a stab at addressing the problem of carbon emissions. Slated for completion in 2012 and carrying a price tag of $1.5 billion (or roughly half the cost of a nuclear power plant), this clean coal-fired plant will be designed to virtually eliminate CO2 emissions, sequester CO2, and simultaneously produce hydrogen gas as a by-product. The masterminds behind this project, the U.S. Department of Energy and the FutureGen Industrial Alliance, are aiming to use this plant as a prototype for other utilities to use in developing their own clean coal plants.
The vast majority of operating U.S. power plants are coal-fired. Additionally, there is no shortage of coal in the United States, with well over 200 years worth of proven reserves at the current high consumption rate. It only makes sense that we learn how to safely harness this cheap source of fuel. U.S. states such as Kentucky, West Virginia, and Montana, whose economies are overly dependent on the coal industry, would agree, although the clock may be ticking for clean coal to have any market share in the centralized power segment.
The wind industry continues to post double-digit annual growth across the globe, and now solar power is becoming more accepted as a centralized source of power generation. With the aid of European government subsidies, California-based SunPower (SPWR) and Norway-based Renewable Energy Corporation (REC.OL) have begun installing solar power plants overseas. And let's not forget how Connecticut is heavily investigating large-scale fuel cells as a means of power generation to satisfy its state-mandated Renewable Portfolio Standard (RPS). Additionally, with the U.S. House of Representatives introducing a federal RPS in the latest draft of the 2007 Energy Bill, it is likely only a matter of time before centralized power generated from renewable energy sources becomes adopted in the United States. Coal is not a renewable resource, so it therefore does not qualify to partake in RPS programs.
Will we ever free ourselves from our addiction to fossil fuels? With the way these new, disruptive technologies are rapidly entering the marketplace and competing against one another, I sure hope so. Given the current market dynamics, I also see renewable energy technologies eventually becoming the norm and rendering coal obsolete, be it clean or not. Tim Flannery and other environmental purists would argue that there is no such thing as "clean coal," as it emits carbon regadless.
There may be centuries worth of coal underneath our soil, but that doesn't mean we have to make use of it all. We can work toward our energy freedom using more advanced technologies before we have nothing left to lose. We have made a great start at the outset of the 21st century and continue to surge forward. That's good enough for me. Good enough for me and my Bobby McGee.
Disclosure and Confessions: I do not own any of the stocks mentioned above and will wait for the current market volatility to settle before buying any shares. I do not own any Janis Joplin CD's, although I once played a supporting role singing "Mercedes Benz" on karaoke.