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Taking a Bet on Alternatives

Taking a Bet on Alternatives

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Published by: allen_silberstein on Sep 10, 2012
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05/13/2014

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“Allen Silberstein”: (Anna Prior): Taking a Bet On Alternatives
 
These days, the Wall Street herd is searching for any alternative to investing in alternativeenergy. Indeed, some analysts have expended a lot of energy on the subject: Solar power is toopricey, wind firms don't make enough money, and geothermal energy is a pipe dream. But thoseare the naysayers. A small group of long-term investors are using this doom and gloom to theiradvantage, plugging in to the industry at low prices.Despite the fits and starts, the field is growing pretty steadily. Worldwide, demand for solar,wind and other non fossil fuel sources will increase 22 percent over the next five years and 85percent over the next 25 years, according to the U.S. Energy Information Administration. TheU.S. government continues to offer generous tax credits for solar power, while big companiessuch as Google and Citigroup are investing hundreds of millions of dollars in wind-farmprojects. The news is even better from abroad: China recently doubled its solar energy target for2015, Germany kept in place incentives for solar and wind power, and even oil-rich Saudi Arabiastarted talking about decreasing domestic oil consumption while bulking up its use of solarpanels. "The increase in demand is going to be huge, and it's going to squeeze out the shortsellers," says Garvin Jabusch, chief investment officer of investment firm Green Alpha Advisors.Analysts also say the industry is getting a boost from Japan's nuclear crisis. This spring Germanyannounced plans to shutter all of its nuclear plants by 2022 and boosted its targets for alternativeelectricity sources. In June, Italy followed suit, with voters blocking a revival of the country'snuclear program and government officials saying the country will look to renewable resources."The whole nuclear situation will be a huge positive for alternative energy," says Angelo Zino, asolar equity analyst with Standard and Poor's.At the top of experts' lists of alternatives is solar. Yes, the industry has had its share of ups anddowns, but analysts say it stands to grow rapidly as the prices for panels and installations comedown and countries rush to fill the void left by closed nuclear plants. "Solar offers good value atthe moment," especially since many of the stocks have fallen recently, says Matthew Page,whose $34 million Guinness Atkinson Alternative Energy fund's top holdings are solar stocks.Take LDK Solar, a Chinese company that is one of the world's largest producers of solar wafers,which are used in solar panel systems. LDK's stock price has dropped 35 percent since the startof the year something that just doesn't make sense to Jabusch, given the company's profitabilityand cash on hand. "Quite honestly, I don't understand why Wall Street hates them this much," hesays.Wind stocks are also on the radar of some investors. But betting on wind power has beenparticularly tough in the past year, because the cost of wind turbines has fallen considerably andtheir manufacturers haven't made up the difference in sales. So experts are now turning to wind-farm operators: Firms such as Spain's EDP Renov veis have benefited from low turbine pricesand large offshore wind-farm projects. Meanwhile, the capability to tap into the unlimited supplyof heat under the Earth's crust makes geothermal energy an attractive long-term prospect,analysts say; but the technology isn't as far along, making it a higher risk investment.

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