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 As the chart on the left suggests, as recently as 2004, all sources of renewable energy other than hydropower and combustible renewables and renewable waste made up only 0.5% of the world's energy supply. Hydropower is a special case of renewables, because the technology has been in use since the 19th century and, more importantly for those looking to expand renewable sources of energy, the majority of good sites for hydropower, at least in the developed world, have already been developed as power sources. Combustible renewables and renewable waste would include biofuels, but the historical driver of this 10.6% of our energy supply involves the burning of wood, plants, and organic waste in developing countries. Still employed around the world, this method of energy generation is, in the truest sense, renewable, though it is highly inefficient in terms of energy conversion and may take several hundred years to replenish itself (e.g., in the case of burned-down forests).
[edit] Why the excitement over renewable energy?  So all this talk of renewable energy really only refers to 0.5% of the world's energy supply. What's all the fuss? Several reasons. First, renewable sources of energy have been growing rapid-fire, albeit from a low-base. Second, technological advances are beginning to make renewable sources of energy cost competitive with energy from fossil fuels. Renewable energy, being derived from the sun, the wind, the oceans, or the earth's heat, is also more evenly distributed around the globe, contributing to energy independence for those countries who can develop it successfully. And lastly, renewable energy, in many cases, reduces the environmental impact, especially the greenhouse gas emissions, associated with the intensive energy use required in many developed countries. It seems like a panacea, right? Energy independence, reduced environmental impact, all from energy sources that should in theory last until the sun burns out... Absolutely, and this, along with government subsidies, is what's driving investor excitement in renewable energy. However, renewable energy has its fair share of challenges. It may not always be available, as in the case of solar or wind power. In this case, other power generating systems are required for back-up, or efficient energy storage mechanisms must be created (e.g., solar batteries). Moreover, renewable energy often has drastic implications for land-use, as in the case of biofuels, which would require large increases in acreage for feedstocks, or wind, which is best utilized in large-scale wind farms. And although renewables tend to be more eco-friendly than nonrenewables, that doesn't mean that they don't come with their own share of environmental concerns. Wind turbine construction can be very energy intensive, damaging to the immediate surrounding area from heavy machinery use and uses large amounts of concrete for its foundation. Some hydro power dams are actually being decommissioned due to the disruption they have caused to salmon populations. Perhaps most importantly, renewable energy isn't necessarily renewable, nor does it necessarily facilitate a reduction in greenhouse gases. For example, geothermal plants are estimated to have very long lives (100+ years), but it is possible that they will cool down in time, depleting the resource of its value as an energy source. Biofuels typically require inputs that use fossil fuels, so their production is not entirely free of greenhouse gases. Large amounts of deforestation to grow the feedstock also severely offset any carbon reductions from the fuel. Heavy inputs of petroleum-based fertilizer and use of heavy, diesel-powered equipment means that the process of making biofuels is not entirely free of greenhouse gas emissions. Lastly, notably excluded from this last is nuclear energy, neither a fossil fuel in the truest sense of the word, nor a form of renewable energy. Nuclear looks a lot like renewable energy -- its fuel sources, uranium and plutonium, should last for many centuries, and once constructed, it produces emission-free energy. However, it has had severe environmental repercussions, and is not strictly renewable, in the sense that plutonium and uranium are not inexhaustible resources. For this reason, nuclear remains the energy orphan. [edit] Drivers of renewable energy[edit] Legislative SupportLegislative support for clean energy investment in the form of subsidies and energy mandates has driven growth in the sector over the past few years. In April, 2008, the Senate approved the passage of the Clean Energy Tax Stimulus Act of 2008, in response to high oil prices and climate change fears. This act continues the previous subsidies, increasing the amount of spending to $19 billion. [edit] Cost of substitutesDemand for renewable energy is driven largely by the price of the alternatives, namely coal and natural gas (for electricity generation) and oil (for liquid fuel). All the factors that drive rising oil prices or fears of peak oil, therefore also drive demand for renewable energy. On the demand side of the equation, clearly rising worldwide energy demand also plays a large role. [edit] Fears of greenhouse gas emissionsAs the evidence in favor of climate change has mounted and governments and citizens have begun to crack down on greenhouse gas emissions, demand for biofuels has ramped up significantly. It's expected that this demand will only continue to grow, as the consensus behind reducing greenhouse gas emissions grows. Heavy investments in renewable energy by such firms as BP and, more recently, companies as diverse as HP and Google, suggest that businesses are already acknowledging this future demand. On February 4th, JP Morgan Chase, Citigroup, and Morgan Stanley stated that they would put into effect a set of "Carbon Principles" by which they would give investment priority to clean energy groups, and force any company planning to build coal-powered plants to show how they would deal with the carbon dioxide pollution in order to get investment money. With investment priority at these major banks now going to renewables, clean energy startups should have less trouble getting financing, leading the market to flourish. [edit] Cost of inputsThough its energy inputs are typically renewable, generating renewable energy is not costless, and like all booming industries, renewable energy faces bottlenecks and supply shortages for its key inputs. In the case of wind energy, the cost of turbines has climbed, as manufacturers typically put customers on 18-month waiting lists and even then struggle to source gearboxes and other key parts for the finished products. Solar cell manufacturers face shortages in polysilicon, while biofuels producers face rising prices for their feedstocks, especially corn and sugarcane. [edit] Companies who benefitThere are companies who benefit from specific trends in renewable energy (e.g., solar, biofuels), but to pick winners from the trend more broadly, it's best to look at companies with broad exposure. Powershares Wilderhill Clean Energy ETF - stock symbol "PBW", along with a slew of other recent offerings, offers broad exposure to the sector. Given the recent plethora of IPO's in renewable energy and clean technology, a broad exposure through an ETF is a good bet for beginning investors in the space -- like the Internet boom, some of these companies will burst and others will survive, but it will be hard to predict early in the development curve which is which. One item investors might want to consider with PBW the Powershares Wilderhill Clean Energy ETF, is that index is based on mostly US companies working on solar panels. An alternative one might consider is Market Vectors Global Alternative Energy ETF - stock symbol "GEX" which has a has invested more than half its assets outside the U.S. and includes a Danish company, Vestas Wind Systems which is the fund's top holding at nearly 11%. Rounding out the top three holdings are a Spanish company -- Gamesa, a specialist in wind turbine and wind farms -- at roughly 8% of holdings, and Norwegian solar energy company Renewable Energy, which accounts for roughly 7% of assets. Companies selling solar power technology and wind energy companies like First Solar (FSLR) stand to benefit from a growing use of alternative energy.
BP has also made much of its efforts to invest in renewable energy. The company remains a leading player in hydrocarbons (fossil fuels), but has invested heavily in its solar division, among others. Ormat Technologies, a large player in geothermal and recovered energy generation with significant IP and expertise, stands to benefit from continued investment in geothermal, and would be especially well-positioned should some lucky company figure out a way to reduce the payback time from geothermal plants. Ocean Power Technologies (OPTT) and Finavera Renewables of Vancouver are companies that make wave energy systems, which could get a boost in development from rising oil prices. [edit] Companies who stand to loseU.S. nuclear powerhouses such as Exelon would likely lose from a rise in renewable electricity generation, as cost-competitive renewable energy from wind, solar, and geothermal will almost certainly be preferable to local populations and governments who have the choice between the two. Exxon Mobil, who has historically resisted the scientific evidence of climate change and has continued to invest feverishly in developing its hydrocarbon resource base, would likely be the most hit among the oil majors by a rise in renewable energy. Patterson-UTI Energy (PTEN) provides oil and natural gas companies with drilling services. Any slump in oil demand caused by adoption of renewable energy would adversely affect demand for their services. Overseas Shipholding Group (OSG) provides shipping services for crude oil and liquefied natural gas. A slump in oil demand would lower the demand for their services.]]
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