Adding More Fuel to the Renewable Fire
Last week, right after Verasun (VSE:NYSE) debuted its IPO with impressive results, ethanol stocks started tanking again.
Even Mad Money's Jim Cramer told the world that the ethanol fad had come to an end. I certainly received my share of e-mails about his comment too.
Now, knowing how bullish I am on ethanol, I suspect that many thought I would disagree with the Mad Money Man's comment.
But the fact is - he's right. The ethanol fad (for now, anyway) has come to an end.
And that's a good thing.
It's a monumental good thing!
Because now we're right back to where we were last year - when ethanol stocks were trading at levels that actually made sense.
You see, thanks to all the hype out of Washington and the impressive PR campaigns the Renewable Fuels Industry launched in conjunction with this hype - all the trend chasers came running. And I'm glad they did! They pushed our stocks through the roof!!!
Of course, now they've jumped ship and sent these stocks plummeting.
But mark my words - some of these stocks are coming back...and with a vengeance. In fact, some already have! (One of our cellulosic ethanol plays rebounded more than 20% in two days.)
But it's not just in the ethanol sector either.
From here on out -- all renewables are fair game!!!
The Engine to Change it All?"The technology is so revolutionary that it was headlined on CNBC, FoxNews, MSNBC and CNN.
The stock's already up more than 261% since March! But with major Defense contracts already underway and the drooling interest from the Big Three Automakers, I think it's going to go a lot higher
- maybe another 312% by the end of the summer.
When you assume...
Last week, Federal Reserve Chairman, Ben Bernanke told us that "Under the assumption that energy prices do not move sharply higher from their already high levels, these long-run effects, though clearly negative, appear to be manageable."
Certainly this enabled a sigh of relief for many. Even the anchor robots with the perfect hair on the nightly news attempted to convey this very ‘calming' message.
Though why - I have absolutely no idea!
Under the assumption that energy prices do not move sharply higher from their already high levels, we'll be okay?
Well, my friends - putting our faith in such an assumption is about as smart as walking through East Baltimore at 2:00 a.m., while fanning yourself with a wad of cash.
Energy prices aren't going to maintain their current levels. They will continue to climb.
How many freakin' red flags does one need to get this?!!
Energy rates are climbing all over the country.
In Maryland, Baltimore Gas & Electric is still battling opportunistic ‘campaigning' politicians over rate hikes that could exceed 70% in less than two weeks.
And in Gladstone, MI, the City Commission just accepted another electricity rate hike. Last year it was a 28% increase, this year it's a 15% increase. A 43% increase in two years?!!
And we're to assume what?!!!
Listen, these kinds of rate increases aren't random isolated incidents that utility companies are using to pad fat CEO bonuses. These are real indicators that should have every energy investor taking notice.
EVERY Government Fleet, 20 Vehicles or More MUST Reduce Petroleum Consumption 20% by...December 31st, 2005!- Executive Order 13149
Compliancy audits have already begun, and it has EVERY government fleet racing to catch up...
...and just like the fleet at Nellis Air Force Base, Nevada, they're turning to this global leader.
Adding More Fuel to the Renewable Fire
Yesterday, engineering, construction and consulting firm, Black & Veatch Corporation released a set of challenges that, if not adequately addressed, could threaten power system integrity and lead to more significant rate increases.
Here's what they found:
· Aging infrastructure - To maintain adequate levels of reliability and security, the industry has to replace the larger part of plants installed in the 1960s and 1970s, now fully depreciated and technologically obsolescent, and figure out how to get paid for the replacements.
· Security - As if protecting electric plant from the threat of terrorism were not enough of a challenge, the industry must also prepare to protect itself against disruptions within the fuel supply chain caused by stoppages at the suppliers or by international difficulties.
· Reliability - Complying with newly mandated grid management rules will, no doubt, constitute a challenge, but not as much as efficiently providing the levels of reliability required by individual customers in a digital environment.
· Environment - Although electric generators have reduced polluting emissions substantially, they will have to do more and do it more efficiently, as additional coal generation comes on line, and as attempts to mitigate global climate change and water shortages will affect plant siting, fuel choice, competitiveness of particular power stations and cost of doing business.
· Technology - Although technology exists that could improve industry reliability and reduce costs, policymakers must find ways to lift barriers to implementation and put in place incentives that would make the industry a technical leader again.
· Fuel policy - As a result of volatile prices, insecure supplies, environmental mandates and market design, developing a conscious fuel policy that takes new risks into account has become a major challenge for power producers and their customers.
· Market structure - Between repeal of the Public Utility Holding Company Act and the creation of new types of companies in restructured markets, the energy supplier now has choices of how to configure for the marketplace, and must plan the right corporate structure and also consider how the restructuring of other firms might affect its future.
· Regulation - Even after a decade of trying, regulators still need to develop firm borders between regulated and unregulated pricing, incentives that would cause electricity suppliers to act efficiently and on behalf of consumers, and signals that bring in needed investment capital.
It is clear that today's utility companies face a number of challenges that will no doubt equate to increased rates for consumers. And as this continues, so will the demand for renewable alternatives.
Now, while I'm not happy that the good people of Baltimore could end up paying almost double on their electric bills next month -- I'd be lying if I said this isn't going to add more fuel to the renewables fire..
I'm telling you now, wind energy, solar energy, geothermal -- all this stuff is getting closer and closer to becoming competitive with conventional energy sources. Especially with all these rate increases. And when we reach that point, there will be very little standing in the way of full-scale renewable energy integration.
That's why it's so important to diversify with renewables today.
Of course, that leaves you with the important question -- out of all the renewable companies trading right now, which are the ones that hold the most potential for significant, long-term growth?
Well, I'm currently working on a new report that addresses that very question (there are three specific companies identified in this report as well). And as a Wealth Daily reader, I'm offering you first crack at it once it's ready.
Just sign up for my free Green Chip Review today, and I'll make sure that you have the opportunity to see this report first.
In the meantime, visit Green Chip Stocks to find out which segments of the renewables industry are positioned to benefit the most from the high energy costs that the utilities are going to pass along to the consumer this summer.
Until next time...
Managing Editor, Green Chip Stocks