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November 05, 2007

Book Review: The Clean Tech Revolution
    by Francesca Rheannon

A new book on investing in green technology looks at new and expected developments that hold out promise for big returns over the coming decades. -- "Green" is green, or so say the authors of The Clean Tech Revolution. Subtitled "The Next Big Growth And Investment Opportunity," authors Ron Pernick and Clint Wilder have written a comprehensive guide to investing in sustainable technology that covers four main sectors—energy, transportation, water, and materials—and lists specific firms that bear watching by investors.

Defining "clean tech" as "any product, service or process that delivers values using limited or zero nonrenewable resources and/or creates significantly less waste than conventional offerings," the authors identify the trends that are increasingly bringing this technology alternative into the mainstream. The rising cost curve of conventional fossil fuel-based technology is meeting the falling cost curve of clean technology, as clean technology production ramps up to meet rising demand and innovation finds new efficiencies.

Pernick and Wilder point to several examples to show that the "clean tech revolution" is already well under way. In the US, over half the states have mandated that utilities provide a specified percentage of their power from renewable sources and offer "clean power" options to their consumers for a small surcharge on their electric bills. Hybrid cars are the fastest growing segment of the auto market. Green building and building efficiency is being enthusiastically embraced by some of America’s largest corporations, as is evidenced by Ford’s Rouge green-roofed car factory in Michigan and Walmart’s commitment to using fluorescent bulbs in place of incandescent bulbs. Last but not least, consumers are increasingly demanding clean and green products. And these trends are even higher in other parts of the world.

In the energy field, Pernick and Wilder make the salient point that the prices of fossil fuels are only going up, while the cost of renewable "fuels" like solar, wind, water and geothermal is effectively zero. Of course, that doesn’t count the cost of the equipment, installation, and maintenance, but the cost of those continues to go down. In fact, the authors contend that innovation in the clean energy field obeys the same Moore’s Law that has relentlessly driven down costs in the semiconductor industry.

In solar, for example, the cost of photovoltaics has dropped by 50% per decade, a trend the authors say is likely to accelerate. The sweet spot is the price at which solar energy is competitive with fossil fuels. Currently, that’s 5 to 12 cents per kilowatt hour. It’s around three times that now, but "The Clean Tech Revolution" says new developments that make solar cells "lighter, thinner, faster to manufacture, and, above all, cheaper" are in the works. Leaders in the solar energy field (both established and emerging) include Sharp Sunpower (ticker: SPWR), and Suntech Power (Tikcer: STP).

Wind may hold out the greatest promise for clean energy investors in the near term, according to Pernick and Wilder. They say business is booming, swelling by 65% in just one year between 2005 and 2006, and predict it to triple to about $60 billion by 2016. Unlike solar, which draws many small start-ups, wind is dominated by large, well-capitalized firms, such as General Electric (Ticker: GE) and FPL Group, in the U.S, Vestas (Ticker: VWDRY.PK), Ibedrola, and Gamesa in Europe, and Suzlon in India.

The authors only slightly moderate their tone of enthusiasm for clean tech when it comes to biofuels. They mention the environmental downsides, such as competition with food crops, deforestation and the use of pesticides and petroleum-based fertilizers. But they point to new developments on the horizon that could abate environmental concerns.

These include using enzymes and newly discovered bacteria to bring down the high cost of cellulosic ethanol production (which uses easily grown low-input crops like switchgrass) and cutting transportation costs by "going local" in raising biofuel crops. VeraSun (Ticker: VSE) is one company the authors recommend watching; despite recent gyrations in its stock price, Pernick and Wilder say its plans to produce biodiesel from distillers’ grain could revolutionize the biofuel industry.

A revolution in fuel efficiency is also in the offing, according to the book. By combining technologies that already exist, along with the use of lighter materials, flex-fuel plug-in electric hybrids could achieve mileage rates of up to 500—or even 800—miles per petrol gallon. Even formerly green-unfriendly General Motors (ticker: GM) is getting into the clean-vehicle game with its Saturn VUE Green Line.

Improved efficiencies in building design and materials, the delivery of electricity over the grid, and the filtering of water are other areas for investment covered by the authors.

For investors interested in the societal aspects of "getting the green by going Green" there is little coverage. For example, water is characterized as the "new oil" because of the increasing scarcity of potable water. Pernick and Wilder "believe that the insatiable thirst for water, in both the developing and developed world, will translate into continued opportunities for multinationals," as well as smaller companies using technological innovations. But nowhere is there mention of how privatization of water supply and delivery by multinational corporations could affect the well being of the poor around the world.

Likewise the book does not ask the toughest question of all: at a time when some experts say the planet will have to cut carbon emissions by 80 to 90% by 2050 (and possibly sooner), is "clean growth" an oxymoron? With a growing global population we may have to accept the prospect of steady or even decreasing production, no matter how clean it is, to achieve these goals.

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