Report: Government Key to Green Investment

John Davis

Investing in green technology is still a good investment… with a little help from the government.

U.S. News and World Report says a new report by Laurence Alexander, Paul Clegg, and Michael McNamara at Jefferies & Co. says what is being done to be green, such as biofuels, wind, and solar technologies, is very good with demand remaining strong. But government money and support programs are still key to green success:

Investors need to keep an eye on the U.S. production tax credit, which doles out $0.019 per kilowatt hour of juice generated. It’s set to expire at the end of 2008, and analysts say the program’s extension “remains the single most important issue facing the wind industry today.” Past failures to extend the credit have had “a devastating effect.” In 2004, installations fell 77 percent from 2003 after the credit was revoked. Analysts don’t expect a repeat of that disaster but caution that “anything is possible” in an election year.

Here, tax and subsidy structures in Spain and the United States matter most. Both have existing plans being revisited this year; Spain in September and the United States by year’s end. The industry is hoping to make headway in breaking open the “potentially enormous” U.S. market, but even if those two major subsidy plans get trimmed a bit, Jefferies expects the overall size of subsidies available to rise.

Ethanol has been all the rage in the sector, but the resulting surge in the price of corn used to produce the stuff could change the future of subsidies in the sector. Technologies that can move biofuel away from the “food vs. fuel” debate like biodiesel, cellulosic ethanol, biobutanol, biochemicals, and bioplastics could get a boost, Jefferies says. But fledgling firms remain risky as turmoil in the broader markets hampers new investing.

Jefferies recommends owning wafer maker PV Crystalox, solar panel and battery stalwart Energy Conversion Devices, and biofuel maker Nova Biosource.

Biodiesel, Ethanol, Solar, Wind