10/24/08   The Perfect Storm for Energy DEPENDENCE

By Peter Forman
Published: October 24, 2008
New York-- A year ago, political and market conditions were the best they ever were to help propel energy independence goals.  High oil prices, cheap money, strong movements against our values and interests globally, and global warming was the topic taking center-stage.

Until now. 

                    

 

We currently find ourselves in the midst of…

 

- Financial markets fallout:

· Stock markets are down 30% to 50% worldwide sending investors to safer, non-speculative markets.  Valuations of riskier alternative energy investments have, in turn, plummeted more than stocks on average.[i]

· Capital credit markets have seized up--reducing if not eliminating money available for investment in, or the refinancing of, alternative energy companies.

· Renewable energy is especially vulnerable to this trend because most of the cost of producing renewable energy is the high capital (up front) costs of these investments.

· Initial and secondary stock offerings by clean energy companies across global markets have slowed to a crawl since the spring, and for the full year could total less than half of the record $25.4 billion for 2007[ii]

· Worldwide project financings for new construction of wind, solar, biofuels and other alternative energy projects this year fell to $17.8 billion in the third quarter, from $23.2 billion in the second quarter, according to New Energy Finance, and is expected to continue declining[iii]

 

-Alternative Commodity Prices

· Oil prices are now half of what they were in July.  This makes investments in alternative energies less desirable, with longer payback periods if at all.

· Drivers of vehicles are already starting to get more comfortable with driving. While polls show drivers are not yet lured by less expensive gas, gasoline consumption is rising.[iv] 

· Natural gas prices are lowering as well

· Wall Street analysts say most utilities and other builders can profitably choose big wind projects over gas-fired plants only when gas prices are $8 per thousand cubic feet or higher, but it settled at $6.79 on Monday[v]

 

-Environmentalism

· Environmentalism and global warming are no longer front page.  Out of sight; out of mind; out of prioritization.

 

-Government Incentives

· Governments' budgets are stretched thin due to rescue plans and tax revenue declines.  Will they continue to fund the cost of alternative energies with diminished resources?

 

-Global Politics

· Some things don't change.

· We are still paying for the oil (at $60/barrel over its 1988 price).

· We are still paying to protect the oil--militarily.

· We are still paying to defend ourselves from those who are funded by the oil.

 

In the words of Yogi Berra, "It's déjà vu all over again."

· Just as it has in the past, when momentum for alternative energies picks up, oil and gas prices fall, ripping the proverbial carpet out from these investments.[vi] 

· Consumers forget.

· Government incentives begin to disappear.

Will we remember?
Will we invest for ourselves and for our children?
Will we move beyond oil?
 


References
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