Alternative Energy Investments

Alternative energy investments is not a new investment theme. However, with oil in triple digits, many advisors now believe the time is right for this sector to be propelled to the forefront. Further, advances in alternative energy technology now favor continued research and support in developing alternatives. By their very nature, alternative energy stocks are best suited for long-term investing. Especially with the current price of oil flucuations we are seeing in today’s markets.  Investors must also be aware that many of these stocks have already had significant runs. Volatility should be expected, as stocks in this sector often rise and fall along with volatility in oil prices. However, few sectors are as well positioned for those willing to dollar-cost average into long-term positions with the goal of building positions for long-tern gains. There are several key drivers of the alternative energy trend. Consider that as recently as  2002, crude oil was trading below $20 per barrel and natural gas cost less than $2 per million British Thermal Units (BTUs). Now, oil is trading at over $100, while natural gas is trading at more than five times its lows.Naturally, rising prices for key energy commodities spells rising costs for consumers. For the first time in history, drivers have been consistently paying more than $3 for a gallon of gasoline. And electricty produced from natural gas is becoming increasingly expensive. Alternative energies offer a way to cut dependence on fossil fuels and reduce this extreme variability in energy costs.

Another pillar of growth for alternative energy investments is increasing government regulation. The U.S. already controls the emission of pollutants from power plants. Pollutants are regulated using a cap-and trade sytem. This system allows power plants polluting above the irregulated maximum emissions to buy credits from cleaner plants. Thus, dirtier plants have the choice of buying potentially expensive credits or taking the steps to reduce emissions of key pollutants. This sytem serves as an economic incentive – cleaner plants are able to recoup some of their pollution mitgation costs by selling their excess environmental credits. And this sytem will become increasingly important as attention turns to carbon dioxide and green house gases.

So there is no mistaken that alternative energy is the future. The question is how far off into the future and which alternative energy will be the winners and which will be the losers.  That of course is the million dollar question and difficult to forecast with any certaintly until the new stimulus package is unfolded or until we see which direction technology advances take shape and also which programs the government will back.  Until that time alternative energy stock picks not entirely a crap shoot as their are some prospective candidates: Suntech Power Holdings (NYSE: STP), Global Alternative Energy ETF (NYSE: GEX), Evergreen Solar (NASDAQ: ESLR) and the likes but only time will tell as to which ones will bust out. Stay tuned for more alternative energy stock picks and alternative energy blogs.