To create jobs in green technology won’t green technology need to be making money and growing? That doesn’t seem to be the case:
The outlook for alternative energy in 2009 is terrible.
Revenue, venture capital investment, and stock prices are all down. Financing has dried up. Demand is gone.
Meanwhile, the prices of traditional energy sources–oil, natural gas, and coal–have collapsed, putting “parity” even farther into the future.
But there’s always next year!
Everyone thought 2009 would be a bust. Now, everyone’s saying saying 2010 will be a bounceback. By 2011, the optimists say, we might even return to 2008 levels.
In the interim though, it will be a bumpy ride, as companies crater, get acquired, and survive on government incentives.
Doesn’t sound like a formula for robust growth to me.
As I see it the problem with this technology is that it survives in a very narrow price niche and is at the mercy of oil prices. Oil prices up—growing. Oil prices down—shrinking. Technological breakthroughs in both energy production and storage could change that (remember, gasoline is both an energy source and a transportable storage medium). Barring that, I genuinely doubt it.
This is true in the United States. Not so much in Europe and Japan.
I suspect that’s because the market price of oil is a smaller component of gasoline prices there than here.
I agree. Additionally, in Europe, alternative energy tech is given the kind of economic incentives that coal and gas are given here. Not to mention the dead end that is ethanol.
The link points to the difficulties facing alternative energy when the price differential expands. Right now it’s expanding due to economic woes, but the same intended result is at the center of a number of energy conservation plans.
I agree w/ Alex on coal and gas subsidies, but coal is so plentiful in the U.S. and is largely depleted in many areas of Europe that it is probably inevitable that coal will maintain an economic advantage here unlike Europe (and need I mention Japan?)
One additional aspect is the financing. A lot of green projects in this country are subsidized by tax credits (which are only valuable if you have revenue) and goodwill R&D. To get the value of the tax credits, evil investment banks created security instruments that allowed people with revenue to get a piece of the tax credits. Those evil investment banks have withdrawn their hands from such machinations.
Re ethanol: It was interesting that the guy who designed Ninetendo’s Wii is starting to role out home ethanol systems (w/ a function to blend with gas and an option to generate electricity). People usually assume that with a few technology advances my favored energy source will catch up, but it works both ways.
One more comment: the European subsidies that encourage people to scrap their old cars and buy new are changing the make-up of the European auto business — they are buying more gasoline vehicles, and scrapping diesel vehicles. What does that mean? I don’t know.
“As I see it the problem with this technology is that it survives in a very narrow price niche and is at the mercy of oil prices. Oil prices up—growing. Oil prices down—shrinking.”
Perfectly said.
As our resident private equity guy, may I relate to you that in the last 3 months I have seen no fewer than 5 tanked solar deals, 3 tanked wind deals and perhaps two dozen tanked Canada oil shale/tar sands related companies……..all because oil prices came down. Now, we aren’t even VC’s involved in this stuff. That these deals even reached us is called desperation. Bankruptcy imminent. Imagine the true volume.
Alternative energy is a nice concept. But raw economics is a bitch.
(Personal anecdote: My thesis in school was called “Sulfur Fixation During Coal Gasification.” My Prof worked on the Manhatten Project. A Big Stick. The theory was that the thermo and kinetics would work out such that the iron naturally occurring in coal could dissolve the SO2 emmitted in a fluidized bed boiler before it went up the stack. I was young and stupid; I thought I was saving the world. Well, uh, er………..it didn’t make commercial sense. 30 years later, there is no sulfur fixation during coal gasification……..)