Why Green Energy May Not Be All Good

Green, clean, non-polluting energy has been the holy grail of Western society for years. With growing concern over pollution and global warming, more nations look to renewable energy as part of their energy portfolios -- a good idea in many regards, but green energy has some drawbacks. 

It's erratic
This past summer, The Guardian ran a story on how British hospitals were asked to generate their own electricity. It seems that in the push for renewable green energy, Britain hit a snag. While they embraced green energy as a nation, Her Majesty's subjects weren't following suit as individuals. The electric utility powers that be knew that, given the erratic nature of green energy (e.g. wind power), overall electricity consumption had to decline or risk power interruptions. Didn't happen. So to ensure power fluctuations didn't disrupt things like ventilators and anesthesia machines, hospitals were encouraged to go off grid by generating their own electricity with diesel generators.

Not good news for wind turbine companies like General Electric  (NYSE: GE  ) . GE manufactures a variety of wind turbine generators for onshore and offshore applications, and news like this can't help. Neither can the announcement that a third British utility in two weeks has canceled a wind farm project. In fairness, GE sold wind turbines to Brazil, Turkey, and the U.S. state of Colorado recently, so don't think the market is collapsing.

GE is capitalizing on green energy by offering equipment and services badly needed by the industry. One example is energy management. GE provides the equipment and expertise for utilities to best manage their grids. When faced with unpredictable power supply from wind farms or solar panels, minimizing transmission losses is valuable.

Perhaps more useful in the U.S. are GE's Waukesha power generators. These generators use natural gas produced at the site of oil or natural gas exploration. This allows oil and natural gas companies to reduce their fuel costs by using natural gas instead of diesel, perhaps by 80%. This past summer, GE's Waukesha generators received EPA certification for mobile non-road applications, further enhancing their appeal to the growing U.S. energy industry.

It requires subsidies
The European push to green energy generated required subsidies and substantially higher utility bills. These came in the form of higher taxes and surcharges on electricity and natural gas. For the U.S., the abundance of natural gas and the conversion of electric power plants from coal to natural gas for fuel led to a decline in air pollution. While not as clean as wind or solar, natural gas certainly provides a cleaner and cheaper source of electricity without the uncertainty or subsidies.

This conversion to natural gas as a utility fuel promises growing business for the likes of Cabot Oil & Gas (NYSE: COG  ) . Cabot sits on a pile of easily (and cheaply) produced natural gas in the Marcellus Shale play. The company boasts some of the lowest production costs in the business. Cabot also boasts profits despite the historically low price of natural gas in the country. Even better for investors, Cabot is pursuing a variety of cost reduction strategies. These include multi-well pads and use of natural gas in both onsite generators and its vehicles.

It can be expensive
One of the biggest sources of gasoline consumption in the U.S. is commuting. Fortunately, Telsa Motors offers commuters an electric car that seems to truly do the job. Great news if you can afford an $87,000 car. If you're a schmuck like me, you're out of luck. I opted for a Honda Civic Hybrid for considerably less.

Natural gas, again, may prove a cleaner source of energy for commuters in the future. In the present, it offers an alternative to diesel for fleet vehicles. Clean Energy Fuels provides both compressed and liquefied natural gas as a vehicle fuel at a growing number of fueling stations across the US. Clean Energy also provides maintenance services for both vehicles and fueling stations.

The adaptation of natural gas as a vehicle fuel in the U.S. has lumbered along and understandably so. Who wants to use natural gas as a fuel when there aren't many fueling stations around? Who wants to build fueling stations when there aren't many natural gas vehicles on the road? Change is coming. Clean Energy recently announced a multi-year deal with two private UPS stations in Texas to provide natural gas fuel in what is described as the largest natural gas truck deployment in the U.S. Nationally, Clean Energy customers ordered 70% more natural gas vehicles than in the previous year.

Final Foolish thoughts
No thinking person, seeing recent pictures of Shanghai choking in pollution (see below), can deny the growing importance of green energy.

 

Photo courtesy of China Daily

Nor can they ignore the problems experienced by the U.K. as it pushes ahead with large scale wind and solar energy projects. For investors, natural gas related companies offer a cleaner source of fuel with modest investment risk. In particular, Clean Energy, having struggled for years, appears to finally be achieving critical mass with growing numbers of natural gas burning vehicles buying its natural gas fuel. Clean Energy may be a good intermediate step on the journey to pollution-free energy.

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