How to Clean Up With Clean Energy

With crude oil prices above $100 per barrel and the world searching for ways to reduce greenhouse gas emissions, the clean energy industry has been in the news a lot lately.

Many investors are interested in investing in clean energy, but are not sure where to start. My book, Profiting from Clean Energy, is designed to help investors navigate the volatile waters of investing in clean energy.

Clean Energy Drivers and Growth Potential

The demand for new and cleaner forms of energy comes not only from climate change and energy security concerns, but also from the sheer amount of new energy generation that will be needed to satisfy the world's fast-growing needs. World energy demand will grow 57% by 2030 and $4 trillion of new power generation assets are needed by 2030, according to the International Energy Agency and the U.S. Department of Energy. With this huge target market, the clean energy industry is riding a megatrend and can easily grow at double-digit annual rates for decades.

Not All Clean Energy Sub-sectors Are Created Equal

The term "clean energy" refers to a collection of very different sub-sectors that have completely different growth prospects, drivers, profit models, and investment prospects. Clean energy typically includes renewable energy generation solutions (solar, wind, geothermal, fuel cells), in addition to power efficiency solutions and advanced battery solutions such as lithium-ion batteries for plug-in hybrid and all-electric vehicles.

It is very important to differentiate among these various sub-sectors from an investment standpoint. For example, the prospects appear attractive for clean energy sub-sectors such as solar, wind, and hybrid batteries. However, investors should be much more cautious on other sectors such as ethanol and fuel cells for transportation. The corn-based ethanol sector, for example, faces an unattractive investment proposition, in my opinion, because of its profit-margin dependence on corn prices (which have more than doubled in the past two years) and also because ethanol in my view will only be a temporary transportation solution until cleaner transportation technologies such as hybrid and all-electric vehicles take over.