Read more about Investing in Renewable Technologies: Wind, Solar, Geotherm, Hydro, Biomass
Understandably, many are concerned that if oil prices continue falling, it will have a direct impact on the requirement for renewable energy resources. This caution on behalf of investors is not without good reason when one looks back to the 1980’s, a time when advances in alternative energy technology, were severely sabotaged by falling oil prices.
Barack Obama talks about creating millions of new jobs within the renewable energy sector. This sudden onslaught of financial challenges facing the industry will inevitably result in a greater dependence for government financing at a time when Washington is already under monstrous economical pressure.
Mr Woolard, CEO of BrightSource Energy Company, correctly pointed out that the market for alternative energy, remains promising when talking long term, but right now in the current situation, they are at best, unpredictable. The fact that the last few months have seen numerous Clean Energy projects across the United States delayed or even abandoned through lack of finances, is evidence enough regarding the volatile nature of these markets.
Analysts are now saying that this year’s global share offerings by renewable energy companies could be less than half of that which was accounted for in 2007. Global financing regarding these markets fell at a phenomenal rate, from twenty three billion dollars in the second quarter to seventeen billion dollars in the third quarter. Furthermore, market research suggests that the rate of financing will drop even more alarmingly in the fourth quarter.
With such a vast amount of capital having been allocated at the beginning of 2008, the United States is likely to still see an increase when compared to 2007 but whether or not this growth can continue, remains to be seen.
The fundamental questions facing renewable energy at this point are, for how much longer can the financial drought last, and just how far will oil and gas prices fall. Yes, oil is still expensive but one would do well to take into consideration that the cost of oil is half of what it was a few months ago, and if the economy continues to weaken, the price could continue to decline.
Market analysts warn that unless gas prices are eight dollars or more per one thousand cubic feet, companies and investors will steer clear of renewable energy projects. With gas prices currently at around six dollars per thousand cubic feet, companies will rather direct their attention to gas fired plants through which they can harvest highly attractive profits. With the price of gas being this low, the prospect of wind factories becomes unattractive to investors who rate profits high on the agenda. Likewise, considering the costs involved with solar power, the prospect of such investments become unimaginable.
Fortunately there is already some legislation in place which demands the development of alternative energy and together with certain federal requirements, this can to a limited degree, help to ensure these markets continue moving forward. However, it’s the private sector which faces the toughest times. While there are an abundance of willing and eager companies ready to take on mega projects, without capital their hands are tied. If they are unable to acquire the necessary financing, then they cannot continue with developments.
As a result of a tremendous push, renewable energy now meets seven percent of the energy requirements in the United States. While ethanol is already available across the entire country, legislation is continuing to push for a dramatic reduction of imported oil over the next fifteen years. Remarkable success has already been achieved in some fields and is most noticeable when one considers America has constructed enough wind power plants, to supply four and a half million homes with electricity.
When one considers that the total investment in renewable energy increased to a staggering one hundred and forty eight billion dollars last year, it is apparent just how big this market is. Of course, with the current economical climate as it is, this figure is likely to drop this year.
Like all markets, the renewable energy market is determined by the amount of potential profit investors can make. When oil and gas prices are high, the drive to develop alternative energy increases. Likewise, when oil and gas prices fall, investor interest drops away just as suddenly. This was especially evident in the 1980’s when the oil markets collapsed, taking with them, all interest in renewable energy developments. It was around this time that the very heart of the industry moved to Europe, spurred on by extremely strong government support and it was not until recent years that it has started returning, hot on the heals of rising oil prices.
This latest round of market changes is however slightly different, due to coal prices being high, and of course the environmental complications concerning coal. Perhaps the most important difference can be credited to the general public though, as they have shown far greater support towards clean energy now than they did in early years. Of course, the fact that America is at war and the related risks involved, also have strong influence over developing green energy, which in turn would reduce dependence on imported oil. To emphasize the urgency for development, a further seventeen billion dollars has recently been made available in the form of tax credits, while many states have passed laws governing the compulsory generation of clean energy by utilities.
As some analysts have pointed out, without enough financial resources, goals can’t be met and in most cases, this results in simply changing the initial target.
Read more about Investing in Renewable Technologies: Wind, Solar, Geotherm, Hydro, Biomass