The energy market is becoming an extremely dangerous place for investors thanks to numerous risks that threaten to crush profits in the near term. Obviously, the most direct example is in Japan, where the crisis at the Fukushima Daiichi nuclear power plant has led to a sell-off in nuclear power companies around the world. Additionally, we have again been reminded of the risks of oil drilling as news broke that BP (BP) may be charged with manslaughter in the aftermath of last year's disaster at the Deepwater Horizon rig, which very nearly destroyed one of the world's oil giants and almost took a number of drillers down with it. Meanwhile, coal, the world's most abundant fuel source, remains unacceptable due to its environmental implications and the inherent dangers of related mining activities. Many nations are hesitant to extend more of their power-supply needs to this unclean fuel.
The headaches and complications surrounding oil, nuclear and coal power seemingly create a huge opportunity for the alternative-energy market that had fallen out of favor as a result of diminished government support and a lack of certainty related to future economic viability. In the days after the Japan disaster, investors flocked to this corner of the market in hopes that a black eye for nuclear power would become a beauty mark for other components of the clean-energy market. Investing in alternative energy isn't exactly a binary decision, as there are a multitude of technologies vying for supremacy in the field. Solar, wind, tidal, geothermal, hydro, biofuels and any number of other budding technologies make this an increasingly crowded investment space. The fact that there are unique drivers of profitability for each technology makes achieving optimal exposure a tall task. These sectors could go in any number of directions in coming years and decades, meaning investors are betting on a relatively unproven idea.
Fortunately for those who are unsure which path markets will take in the years ahead, there are a few funds that take a different look at the clean-energy market, potentially helping to avoid many tough decisions and still power appreciation within portfolios.