JBL: Defending Ethanol

Right now you can produce wind-generated electricity at around 3.5 cents a kWh. This does not take into effect the production tax credit (PTC) of 1.9 cents a kWh, which virtually negates paying any federal tax for the first 10 years of the project. The PTC is set to expire in 2007; however, it has been set to expire before and I do not believe any politician will hurt renewable energy by canceling the PTC.

The REC (renewable energy credit) market is another source of pure profit for the wind producers. RECs are bought by energy companies that do not have enough green energy, such as those in New York. A company in New York that is required to produce so much green energy can buy a REC from a wind farm to fulfill their obligation. RECs are currently worth around 2 cents a kWh.

Add to all of this current standard local tax abatements of 40 to 60 cents and you have wind turbines in West Texas looking like the old wildcat days of oil. Wind energy is increasing so dramatically that the blade and gear boxes have a 24 to 30 month wait time.

General Electric and FPL have a huge presence in West Texas for good reason. The only place that is more of a sweet spot is North Dakota, but that state doesn’t have the infrastructure to support a huge wind infrastructure.

The only problem with investing in wind is that these companies are very far from being pure plays. The only pure play to me is Zoltek , which manufactures the carbon fibers for applications in commercial products like blades for a wind turbine.

Zoltek’s stock took a recent hit due to the halting of certain turbines in the Midwest to see what impact the structures have on our air defense systems. I believe this will not be an issue as the U.K. dealt with that same thing a couple of years ago.