Alternative energy?

2 Comments

1. csanda says:

   October 11, 2009 at 11:47 am

   Vanguard sells only one alternative energy mutual fund. It is Guiness Atkinson Alternative Energy Fund (GAAEX).

   They have a high expense ratio of 1.98%.

   While I respect your desire to invest in alternative energy, I don’t think it will be a big money maker for you. The analogy is bowling alley stocks in the 1950s and dot-coms in the 1990s. Back then, everone loved bowling and things that were online. The problem was that the fundamentals underlying both industries was all wrong and both sectors did not live up to the hype. Such is the same with alternative energy. The issue is that coal is by far the cheapest form of energy out there, followed by nuclear, then natural gas and crude oil. Meanwhile, most green fuels are double and triple the cost of traditional fuels.

   Hooray for ethanol, but it’s pretty screwed. First, it takes almost as much hydrocarbons to fertilize, sow, maintain and then harvest corn (the main feedstock for US-based ethanol). Now gasoline made from crude oil costs about $1.70/gallon wholesale. It costs about $1.50 to refine corn into ethanol. There is about $0.51/gallon is corn subsidies per gallon of ethanol. And ethanol has only 67% of the energy capacity as gasoline. So ethanol costs about double the price of gasoline before you’ve even bought the corn. In theory, we can create ethanol from cellulosic sources (i.e. think grasses and trees), but we haven’t come up with the right enzymes to break down the cellulose into alcohol. Fuel cells? Billions upon billions upon billions went into VC funds to fund hydrogen fuel cells. Bottom line… still more far, far more expensive than gas. More nuclear power? More natural gas plants (with their highly explosive regassification plants). NIMBY is far too powerful in a democracy for people to vote to have a power plant near their home. They always want it near someone else’s home. Wind power has promises because it can compete against hydrocarbon based power on a price basis (after including long-term operation, fuel stock and capital expenditures). However, really windy place out in the middle of nowhere where people want them are in only a few places. Furthermore, we still haven’t invented a superconductor that works without having to freeze the thing. So we use copper and its highyl inefficient transmission methods as ohms suck away all the energy.

   No, my friend, people will always choose powerplants to be built in someone else’s back yard, give lip service to green energy but won’t actually buy it when it costs triple what gasoline costs. The solution is taxing oil with a huge tax to fully cost in the crude (e.g. polution), but no politician is going to touch that with a ten foot pole until it is too late.

   The world is going to consume more oil like it has for the last century and an unstoppable 2% march, like’s its done for decades and decades. More wars will be fought. When oil reach really, really high prices – where alternative energy can compete on cost as opposed to just environmentalism at a massive cost to the consumer – will alternative energy thrive. That’s when we reach the tipping point.
2. reunionrowdies says:

   October 11, 2009 at 11:47 am

   Domini (http://www.domini.com) provides socially responsible investment funds. I highly recommend them.