Firstly, let’s look at wind. This is currently the cheapest form of UK electricity generation. Costs are falling, but not precipitously – and wind price falls are easily outpaced by those of solar. We can therefore expect to see a rapid growth in the amount of wind energy infrastructure installed around the world in the medium term. But despite this, it’s not the big energy story of the 21st century.
Wind power is renewable, but it’s not in unlimited supply. All wind energy ultimately comes from the sun, and only around 0.1% of sunlight ends up as commercially-usable wind energy. Nevertheless, the intermittency of renewables means that a mix is needed, and wind will be a part of that mix – at least for a while. Wind is therefore a promising investment, for the medium term. You can look at wind power utilities firms, which offer predictable, medium-term cash returns. Turbine manufacturers, such as Vestas, offer arguably more risk – and potentially more reward. For a more exciting play, look at the smaller engineering and technology firms addressing the wind sector with bleeding-edge ideas – such as flying wind turbines. Even Google has a stake in this unusual technology.
Secondly, biomass. This is generally not a good news story. Biomass suffers many of the problems of fossils, but often worse. Burning biomass ties you to heat as an output – with all of the resulting inefficiencies. Furthermore, rough biomass (eg, coppiced willow) also has much less energy per kilo than coal does. Refined biofuels (eg, alcohol) are expensive, and often compete with food crops for land. Much of the current biofuels push comes from the cosseted agricultural and fossil fuels industries, which are looking to keep their snouts in the trough. But their lobbying ultimately cannot make the numbers stack up for current agrofuels, or for woody biomass for power stations.
Nevertheless, all is not lost – and there are some really cool long-term biofuels plays out there. Firstly, it may ultimately be possible to make refined fuels from woody matter. If you’re up for taking a big risk, look at investing in firms working on these advanced cellulosic biofuels (eg: ICM Inc). Even longer term, there’s a potential for a real silver lining on the biofuels cloud: algae-based fuel.
Algae can be grown in sealed units, such as in deserts or at sea – saving precious agricultural land. This could make biofuels a major player, if we can unlock previously-barren areas to grow our tiny green fuel plants. One thing to note: perhaps the stickiest problem in decarbonisation is aircraft fuel. These oily algal biofuels could end up being great for jets. Algae firms (eg: Algenol) are a potentially risky niche investment – but definitely not a crazy one for the long term.
Thirdly, tidal. Tidal power has one key advantage in the short term: reliability. It’s a strong contender for kicking out the nuclear/fossil baseload power that keeps the lights on during still, cold winter evenings. Right now, tidal technology is experimental and costs are comparable with overpriced nuclear energy. However, there should be early, steep falls. This is a technology worth watching (and potentially backing) – but because of reliability, not cost. If you’d like an example, Bourne Energy is one firm operating in the sector. However, the long life of tidal facilities means that they’ll be trying to pay their way long after solar panel costs have fallen so low that tidal can’t touch them. Nevertheless, government contracts may be available even at a high, long-term price (look at the UK nuclear scene for an example of how this could happen).
However, there are two really big threats to tidal, which mean that I don’t think it’s a strategic industry to back. Firstly, there are threats coming from storage technologies – which will help the cheaper wind and solar generators bridge the gaps where the sun doesn’t shine and the wind doesn’t blow. Secondly, there’s a huge issue with availability: there’s just not enough tidal power to make the world go round. Compare the enormous heating effect of the sun, with the tiny heating effect of the tides. This shows why the sun, and not the moon, is the power source of the future.
Tomorrow, we’ll move onto the real energy game-changer: solar. This is the big news story.