Investing in Renewable Energy....

Today’s post: Wednesday, 9-24-2008

According to today’s news, there is now a much better chance that the renewable energy tax credits will be extended. The Senate passed a bill that does this which includes an 8 year extension for solar.

And, if the House also passes a companion bill, it looks as if the President will sign it. Since the Senate and the possibility of a Presidential veto were the main roadblocks until now, this looks good.

This has two investment implications.

A. Solar stocks have already gone up on this news. And, because this is a new industry with great promise, some renewable energy and solar stocks may be overvalued. In addition, some renewable companies that look promising now may lose out to better technology or stronger competitors a few years from now.

However, there are two reasons you might want to invest in these stocks now.

In my opinion, the market does not yet fully value the huge expansion in demand and sales that these companies collectively are likely to experience as the world transitions to an economy based on renewable energy.

Second, all stocks are still selling for less than they may well sell for once the financial markets stabilize.

So this is quite possibly a good time to invest in these stocks.

Given the risks, do NOT bet the rent money. But if you are younger or are rich enough to have investment money that’s safe to put into higher risk, higher reward stocks that might multiply in value, this could be a good time to invest.

1. Here’s a website that has four renewable energy ideas and companies. The company I know, Nanosolar, is not now a public company. And, the other three may also still be private. But the technologies look interesting. And the companies may be good investments if they ever go public.

http://www.usatoday.com/money/industries/energy/environment/2008-09-08-energy-innovations-environment_N.htm/

Nanosolar is the thin film solar company. They also include a company that is gearing up to make ethanol from algae; a company with a biofuel substitute for coal in facilities that now burn coal; & and a more cost effective way to store wind energy for release when the wind is NOT blowing.

2. TheStreet.com has a whole suite of articles on solar and renewable energy and on solar and renewable energy companies that have stock that you CAN buy. It also has information on two ETF’s that enable you to make a bet on the industry without betting all your money on one or two companies.

http://www.thestreet.com/story/10431707/1/solar-energy-what-you-need-to-know.html?puc=_tscrss

My take on it is that if, as now looks likely, the renewable energy tax credits ARE extended; & the financial markets do stabilize as Warren Buffett is betting with his large investment in Goldman Sachs, solar and renewable energy stocks will go mostly higher from here.

B. In other news, it looks increasingly likely that cap & trade systems to cut CO2 emissions from burning fossil fuels will be tried more and more.

This may mean sharp increases in the price of power from utilities now generating electricity from burning fossil fuels once these systems become widespread.

So, to protect yourself from being totally dependent on the utilities that still mostly burn fossil fuels for your electricity, if you possibly can arrange to engineer your home or business for energy efficiency and install solar panels it may pay you double to do so. You’ll get tax credits to help pay for it. And, you’ll wind up saving a lot of money on the electricity you use.

Unlike buying solar and renewable energy stocks, that looks both safe & prudent and likely to give you a reliably positive return.

If you can afford it, why not do some of each?