The Future of Alternative Energy

The problem with alternative energy is that it hasn't been a very good alternative. Wind turbines can't power much on their own. Solar isn't much good without a sunny day. And biofuels... well, do you want to eat, or do you want to drive? Until functional fusion reactors come online -- and that's been "20 years away" for a long time -- the energy we've got is the energy we're going to get. Can any of it ever provide enough to meet our needs?

A long-running delusion
The biofuels industry started 2011 with a mandate to produce 250 million gallons of fuel from agricultural wastes. Their swan dive of success became a faceplant of failure, and the mandate was dropped to 6.6 million gallons because no one had the capacity to make the big number happen. This is far from the first time biofuels have been hyped only to fall flat:

"From our cellulose waste products on the farm such as straw, corn-stalks, corn cobs and all similar sorts of material we throw away, we can get, by present known methods, enough alcohol to run our automotive equipment in the United States." -- Thomas Midgley, 1921

"Exciting developments in the conversion of agricultural, forestry, and urban wastes to methanol and other liquid and gaseous fuels now offer practical, economically interesting technologies sufficient to run an efficient US transport sector." -- Amory Lovins, 1976

The case against biofuels
Replacing even 10% of our present daily oil use with biofuels would -- because biofuels are only two-thirds as effective an energy source as petroleum – require 2.9 million barrels of biofuels be produced every day, or 122 million gallons. That's over 44 billion gallons of biofuels per year.

Robert Bryce's calculations in Power Hungry can help us figure out how much biomass we need to make that happen: 445 million tons worth, which would require over 60,000 square miles if planted with switchgrass. This is slightly larger than the state of Georgia.

How close are we to this seemingly unattainable goal? KiOR's (Nasdaq: KIOR  ) current annual production capacity is 11 million gallons, or about 1% of one day's worth of American oil consumption. It's one of only three producers pegged by the U.S. Energy Information Administration for large-scale production this year.

Any way the wind blows
Wind power has a technological edge on biofuels, having made a hundredfold leap in turbine power capabilities since the early '80s. Still, the land needed to generate a given amount of wind power is far larger than our hydrocarbon mainstays require.

Wind power also suffers from one obvious drawback: The wind doesn't blow all the time. Take the following example, also from Power Hungry:

In 2007, The Electric Reliability Council of Texas (ERCOT) determined that just "8.7% of the installed wind capability [in Texas] can be counted on as dependable capacity." By mid-2009, Texas had 8,203 megawatts of installed wind-power capacity. But ERCOT ... was estimating that just 708 megawatts of the state's wind-generation capacity could actually be counted on.

Warren Buffett's Berkshire Hathaway (NYSE: BRK-B  ) subsidiary MidAmerican Energy seems like a big wind-energy player, claiming to be the top wind producer in the country. Yet from 2007 to 2010, during which its stated wind power generating capacity increased by over 1,200 megawatts (and nothing else changed), its total accredited (closer to the truth) generating capacity increased by only 300 megawatts.

The great bright hope
That leaves us with solar. It's certainly the popular option -- a Kelton Research study found that public support for solar development has averaged over 90% for the past four years. Given the opportunity to offer governmental funding for new energy development, nearly twice the study's respondents preferred supporting solar over its nearest competitor, natural gas.

Though still well behind wind power's installed base -- keep in mind the reported capacity may be much higher than the reality -- solar has been galloping forward in both efficiency and installations. 2011 alone saw more than 20,000 megawatts of new capacity installed globally, with Europe taking the lion's share. This continued an installation explosion begun last year, which has brought double the capacity online as existed before 2010. The panel cost per watt also dropped by 30% over the course of 2011, finally making solar competitive with more established power sources.

Shining a light on the big picture
My Foolish colleague Travis Hoium presented a thought experiment earlier this year, covering the Mojave Desert in a hypothetical carpet of solar panels. He found that the most-efficient panels, made by SunPower (Nasdaq: SPWR  ) , could provide more than double the United States' energy needs. But without the infrastructure (both transmission and storage), solar can't be a full-time answer to our energy needs. An independent massive installation has to be able to cope with inconsistent supply as well as fluctuating demand.

Manufacturers remain in a race to the bottom, with the Chinese government pouring money into shaky companies like JA Solar (Nasdaq: JASO  ) and LDK Solar (NYSE: LDK  ) . It's an incomplete solution with a number of incomplete companies likely to go under. Generative efficiency matters most, but it'll matter more when we can make full use of its gains.

The other hydrocarbon
When wind and solar can't cut it, natural gas is often there to provide reliable support. I remain hopeful for solar's long-term success, but investing in the sector now seems like throwing good money after bad. While subsidized panel manufacturers compete to lose the most money in a glutted market, major natural gas producers can step in and provide the steady energy the world needs.

If you're still looking for a great energy investment for right now, many of the best returns still come from the oil and gas industry. The Motley Fool's dug deep to find a company that provides vital services and equipment needed to get the stuff out of the ground. It doesn't matter who taps the next big find, because this company is likely to be there. To access the full report, just click here -- it's free.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter for more news and insights. 

The Motley Fool owns shares of Berkshire Hathaway and Devon Energy. Motley Fool newsletter services have recommended buying shares of Chesapeake Energy and Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 05, 2012, at 5:25 PM, DJDynamicNC wrote:

    Another thought experiment - at what level of saturation would distributed panel generation at point-of-use become sufficent for national residential and even commercial needs?

    It is the era of decentralization in power useage as well as generation and a truly smart grid changes the nature of the beast entirely. And a smart grid isn't that far off - look to NEST (nest.com) and Google and many more for smart grid solutions already ramping up.

    There's even a smart grid fund I invest in - listed on NASDAQ with a symbol, appropriately enough, of GRID.

  • Report this Comment On January 05, 2012, at 9:10 PM, lanceim59 wrote:

    After all the negative comments you've received yesterday, you're still writing about alternative energy? Alex, maybe you should find another topic to write about?

  • Report this Comment On January 05, 2012, at 9:41 PM, TMFBiggles wrote:

    @ DJDynamicNC -

    That might be a good premise for an article. Certainly worth looking into.

    @ lanceim59 -

    If I ran away from subjects because someone wrote a negative comment about my analysis, I'd run out of ideas pretty quickly.

  • Report this Comment On January 06, 2012, at 6:47 PM, LLIHOTZ wrote:

    I agree the most consistent and cleanest fossil fuel energy is natural gas. There are heated debates in PA/NJ concerning the potential for polluting the Delaware River (and elsewhere) by fracking, and there are petitions circulating to disallow the industry to work in areas that cannot afford to have their drinking water contaminated. I don't know whether the inevitability of contaminating drinking water is true or not, whether their safety standards are high enough to prevent it.

    I saw an interview with C. Boone Pickens recently, who wants to install wind turbines all the way through the "wind belt", north to south in tornado country. My upstate NY farmer friends who are leasing their land for turbines are located at the foothills of the Adirondacks, and the tops of the hills get a lot of wind. My point is to use them strategically where they are likely to be running the most. It's sad if those installed in TX are producing < 9% of their capability.

    As for sunshine and solar, it is produced during the "peak period" of energy use when the need is greatest. That's why it is potentially the best in alleviating the strain on the grid system. I am not sure if all states are the same as here, but NJ only allows one to install a residential solar system equal to the amount of electricity that was used in the previous 12 months. But each system installed takes one more house "off the grid." I find it hard to believe that the technology is far from fruition to be able to store excess energy produced.

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