With Hurricane Katrina shutting down an estimated five percent of American oil refining capacity, and oil prices already at an all-time high, investors are starting to look seriously at renewable forms of energy as the next big thing. Share prices in several small American companies producing solar panels and related equipment—including Evergreen Solar, DayStar Technologies, Energy Conversion Devices and Spire—have more than doubled over the past year. Meanwhile, Cypress Semiconductor hopes to raise more than $100 million for a spin-off IPO of its solar subsidiary SunPower this fall. Analysts think that the damage from Katrina will only help these companies raise more money via the public markets and close the cost gap between traditional forms of power and renewable sources.
“The solar market is projected to grow 35 percent a year for the next three to five years,” said Walter V. Nasdeo of Ardour Capital, a New York-based investment bank specializing in energy companies. “As these technologies get better, we’re seeing things being developed like solar panels integrated into roofing tiles. That way, they don’t look like a science project hanging on your roof.”
In order to diversify their offerings and appeal to certain customer sets, as many as half of the country’s largest utilities now offer consumers the option of paying a slight cost premium to purchase renewable power. Meanwhile, several states are doing their part by offering tax incentives and rebates on the installation of solar panels and other technologies based on harnessing renewable forms of energy. Even the federal government, long reticent to subsidize “alternative” energy at the expense of entrenched petroleum interests, is jumping on the renewables bandwagon, offering a $2,000 tax incentive for the purchase and installation of residential solar systems as part of the Bush administration’s recently-approved omnibus energy bill.
“I’ve always believed that solar is a freight train that can’t be stopped,” says Roger G. Little, CEO of Bedford, Mass.-based Spire, which makes equipment to build and test solar panels. “It started small, but the compound annual growth rate for the last 10 years has been 20 percent. This year, there’s a $10 billion worldwide market for systems.”
But despite their promise, renewables still only account for around 11% of Americans’ energy consumption. And Department of Energy analysts estimate that without substantially greater incentives in place, renewables’ share of America’s total energy pie will only grow 2% or so by the end of the decade, leaving fossil fuels king long into the foreseeable future. But in the end, no one knows just how great an effect the wild card of rising oil prices will have on demand for fossil fuels, and their alternatives.