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Workshop: The Energy Strategist, Beyond Oil & Gas
09/07/2007 12:00 am EST
The 'New' Alternative Energy Plays
Energy expert Elliott Gue surprised attendees when he told them that electricity demand around the world is growing much faster than oil demand...
Gue noted that the incredible growth in non-OECD (Organization for Economic Co-operation & Development) countries like China and India is ‘fueling’ consumption at vastly increasing rates. But other nations, such as Vietnam and Cambodia, are also joining the rush to development. In fact, between 2010-2015, the demand in non-OECD countries is expected to surpass the OECD, the most developed countries in the world!
The upshot of this development is a need for countries around the globe to find alternative fuels to the traditional fossil fuels such as coal in order to meet the escalating demand. Gue expanded on the alternative energy theme, discussing the pros and cons of some of the fastest-growing fields.
Wind is the largest of the non-hydroelectric alternative power sources, and is expanding rapidly as the governments in many nations are handing out substantial subsidies to encourage that growth. The biggest problem with wind, however, is that it doesn’t blow at the same rate at all times, leaving a gap between the total installed capacity (16-17% of all electricity) and the actual generation (5-6%). But the subsidies make some related stocks attractive and Gue’s favorite picks in this sector include Hexcel (HXL), Zoltek (ZOLT), and Paris-based EDF Generation (EDFEF).
Solar power, although a media darling, is extremely expensive to generate, so much so that power generation for the grid is many decades away from being viable. However, solar also is being subsidized and investment plays include SunPower (SPWR).
In the biofuels arena, Gue believes that ethanol and biodiesal will never be a replacement for oil, but the heavy subsidies make some of the industry-related agricultural shares compelling, including Monsanto (MON), Syngenta (SYT), MP Evans (MPU, London), and Anglo Eastern Plantation (AEP, London).
And although there are obvious investment plays in each of the above arenas, Gue believes the best area in which to invest – and the most viable of the alternatives – is nuclear power. Just 25-26% of the cost of nuclear power is the fuel (and only 4-5% of that is uranium. That advantageously compares to coal (60-65%) and natural gas (85%).
Gue stated that nuclear power capacity around the globe is approximately 270,000 MWH; another 400,000 is under construction and 650,000 is proposed. The primary driver to the resurgence of nuclear power is the demand for cleaner fuels, backed by the increasing regulation of carbon dioxide emissions all over the world, as well as the vast increase in demand. Investment plays include Paladin Resources (PDN.TO, PALAF); Uranium One (UUU.TO, SXRZF). .
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