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New York Times: ‘Suits’ Join ‘Greens’ to Ride Renewables Wave

LONDON (Reuters) – Wind is filling the sails of the alternative energy industry after repeated past false starts, bringing big business and the green movement into an uneasy partnership — as investors smell money.

Fears of hype and even a dotcom-style bubble cannot cloud their view that renewable energy’s day may have come, as the world’s most pressing concerns combine: climate change, breakneck economic growth in China and energy security.

In the past — the 1970s for example — it was high oil prices that spurred the hunt for alternatives like wind and solar, usually the domain of academic professors, environmentalists and rural communes.

When oil prices sagged interest evaporated. Now high oil prices are back but it is the other new ingredients that have alerted investors now including banks, pension funds and hedge funds.

“Before 2003 it was idealists in suits, now it’s just suits, perhaps suits with ideals,” said Michael Liebreich, chief executive of researchers New Energy Finance.

“Even in 2004 it was still a lonely time doing this stuff.”

One big mover in 2004 was the California Public Employees’ Retirement System (CalPERS), the biggest U.S. public pension fund with $237 billion in assets. It then launched cleantech funding which last week it trebled to $600 million.

“It’s not a one-trick pony,” says Robin Batchelor who co-manages $4 billion in clean energy funds in London for investment manager BlackRock. He first launched such funds in 2000.

“Questions then (when we launched) were: is global warming happening? Is man causing it? Will Kyoto ever get signed? Will these technologies ever be competitive?”

GREEN, OR WHAT?

Big industrials in the energy sector, formerly seen as part of the problem, are supporting a switch to the likes of wind, solar, geothermal, hydro and wave power — which unlike fossil fuels do not emit the greenhouse gas carbon dioxide (CO2).

“Significantly increasing the use of such energy sources, both when building new infrastructure and when replacing fossil fuel facilities, is essential if we are to meet the climate change challenge,” read a statement last week from a group calling itself the Global Roundtable on Climate Change.

It was undersigned by the likes of NRG Energy, the World Petroleum Council and International Power.

“Greens” are warily embracing this potentially dream-transforming support: suspicions linger of tokenism.

“It’s strange bedfellows,” said Steve Sawyer, climate and energy policy adviser to Greenpeace, who joins the side of industry in April when he becomes secretary-general to lobby group the Global Wind Energy Council. Its members include BP and Shell.

“Historically the corporate world was the enemy, that can’t continue.”

Key differences between environmentalists and big business include the future for nuclear power and schemes to use carbon capture and sequestration (CCS) to bury CO2 underground.

Oil firms see energy demand broadly doubling by 2050, while Greenpeace International and the European Renewable Energy Council want an absolute cut.

The oil industry would benefit from rising energy demand, which would imply continued dependence on fossil fuels, in turn requiring CCS to allow nations to hit climate change targets.

An actual cut, requiring a leap in energy efficiency, would suit the renewable energy lobby, enabling alternatives to become big players rather than a support act, while avoiding CCS and nuclear altogether.

BUBBLE?

Investors, analysts and “greens” agree on the growth.

“There’s a real demand now. I think there’ll be returns to be made, and outsize returns,” said John Greenwood, who heads CalPERS’ Alternative Investment Management CleanTech initiative.

“We’re seeing phenomenal growth in demand for better, newer, cleaner types of energy,” said Russell Pullan, Director of New Energy & Clean Technology Ventures at Nomura International.

Especially thriving are companies which ease any supply bottlenecks — makers of wind turbines, for example, or of silicon chips for the solar industry.

Shares of silicon recycling firm China’s London-listed ReneSola have more than doubled in the past three months. The bulk of alternative energy stocks trade at 20-40 times earnings, says BlackRock’s Batchelor, compared with around 10 times for a typical European oil major.

Warning signs that a stock bubble may be developing could include share performance outstripping growth in earnings or in installed capacity.

“In the last four years (clean energy) stocks are up an annualized 30 percent,” said Liebreich. “Growth in installed capacity is up an average 20-25 percent. The speed dial is touching the red zone right now. We aren’t in a bubble yet.”

“You are having to pay a bit for that growth,” said Batchelor. “In the absence of earnings growth I’d be nervous.”

Published: February 26, 2007

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1 Comment on “New York Times: ‘Suits’ Join ‘Greens’ to Ride Renewables Wave”

  1. #1 Evan Andersen
    on Mar 12th, 2007 at 10:02

    In the next few years there are going to be many opportunities for hedge funds in the Green category. Emission’s trading is going to dramatically help climate control and we will see the hedge funds participating in such trading.
    Evan Andersen
    Lydia Capital

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