Concern about climate change has given fresh impetus to the alternative power industry, says Peter Marsh Published: January 29 2001 19:47GMT | Last Updated: January 29 2001 20:58GMT Last autumn, Robin Batchelor, a fund manager at Merrill Lynch, toured London, Switzerland and the Channel Islands to try to entice investors to a new fund for high-technology companies. The timing seemed poor, given widespread disillusionment with internet and telecommunications businesses. Yet the fund - which will invest in companies promoting novel energy technologies such as wind and solar power - was heavily oversubscribed, closing at #200m. "People are realising the fantastically exciting potential of these companies," says an animated Mr Batchelor. Even a decade ago, alternative energy conjured up visions of idealists who wanted to change the world and few investors were interested. But the mood has now swung dramatically. Not only has the Californian energy crisis shown the pitfalls of over-reliance on traditional fuels, but environmental concerns are growing over carbon dioxide emissions from fossil fuel-burning power stations. Renewed interest from politicians and consumers has given a huge boost to the 300 or so companies (two-thirds of them unquoted) whose main business is developing alternative energy solutions. Many have already been aided by government subsidies intended to increase the proportion - now less than 1 per cent - of the world's 3,300GW electricity generating capacity that comes from alternative energy sources. The European Union wants a fifth of its power to come from "renewable" sources by 2010. Some analysts believe that within 50 years half the world's electricity could come from non-fossil-fuel schemes, including well established hydro-power schemes but excluding nuclear energy. A prime beneficiary of this trend has been Vestas, a Danish agricultural machinery maker that faced bankruptcy in 1986. The following year it refocused on wind energy and has not looked back: it has become the world's biggest maker of wind turbines, with a share price that rose 158 per cent in the past year, giving it a market capitalisation of $6bn. The company is being helped by the "fear and risk of climate change", says Johannes Poulsen, its managing director. Of the various alternative energy fields, wind power is the most mature, with generation costs not far above conventional power stations. Global investment in wind power systems will total $27bn between 2000 and 2005, according to Dresdner Kleinwort Wasserstein, the investment bank. By 2020, world wind power generating capacity could total 400GW, equivalent to 200 large power stations. Germany, which is spending E2bn ($1.8bn) a year to promote wind energy, has emerged as the world leader in the technology, with wind farms sprouting up around the country and the wind-turbine business supporting an estimated 35,000 jobs. Mr Poulsen says the costs of producing power from the wind will continue to fall, thanks to engineering advances in components such as drives, gearboxes and generators. Solar power too is becoming more economically viable. The cost of generating a single watt of electricity from a solar cell (a piece of silicon manufactured in a similar way to microchips) has fallen from $200 in 1980 to $3.50 today, according to Peter Aschenbrenner, vice-president for sales at Denver-based Astropower, the world's fifth biggest maker of solar cells. The four biggest companies in this field are all large enterprises - Germany's Siemens, Kyocera and Sharp of Japan and the UK's BP. However, many analysts expect "pure play" solar companies such as Astropower, Energy Conversion Devices of the US and Atlantis of Switzerland to do most to encourage the development of solar energy. Astropower, which is quoted on Nasdaq, turns out solar cells using similar principles to making glass. Its shares have risen from $6 at its initial public offering three years ago to a current quote of $37. "We are increasingly finding we can bypass utilities by selling our systems directly to consumers," says Mr Aschenbrenner. Another form of energy production attracting interest is fuel cells - devices that create electricity efficiently by mixing hydrogen (possibly from natural gas) and oxygen from the air. While General Electric, Siemens and Alstom, the world's three biggest makers of conventional power stations, are all keen on either developing or selling fuel cells, the pace in this sector is again being set by smaller companies, including Ballard of Canada and Plug Power and H-Power of the US. Frank Gibbard, chief executive of H-Power, who has signed a contract to provide 12,000 fuel-cell systems for rural co-operatives throughout the US, concedes that fuel cells' manufacturing costs still need to fall by half, from $2,000/kW, before they are considered alternatives on cost grounds to conventional power sources. "I think these cost reductions will come as companies gain experience with manufacturing and reliability in the field. No one is quite there yet but they could be in a year to 18 months," he says. Most executives in "new energy" companies agree that costs will fall further. Yet they are still eager for displays of support from large companies and governments. The most prominent move so far from a large industrial group came last year when ABB, the Swiss-Swedish engineering company, quit conventional power generation projects in favour of "green" programmes such as wind power and high-efficiency gas-driven "micro-turbines". Jeremy Leggett, a former Greenpeace scientist who is chief executive of Solar Century, a UK solar energy company, says government support is crucial in encouraging adoption of alternative energy sources. He argues that the government should give incentives to housebuilders to incorporate solar panels in new homes. Even in cloudy Britain, these can generate a lot of energy. As for investors, they hope the ambitions of many of the new energy companies will be matched by reality. "Right now we are a fly compared to the big companies [in energy]," says Frank Asbeck, chairman of Solarworld, a Bonn-based solar energy company with sales last year of DM105m ($49m). That leaves plenty of room to grow; but as many internet companies now know, potential is not always enough. from FT.com _______________________________________________ Crashlist website: http://website.lineone.net/~resource_base
