Alternative Energy Gains Political Power

Popular pundits often describe globalization in glowing terms. True, there are many benefits to global trade, including lower prices, greater efficiency, and higher wages. However, increasing interdependence also can lead to conflicts with potentially far-reaching consequences. A case in point: Russia's shutdown of natural gas lines to the Ukraine, which may prove to be a boon for alternative energy companies.

In retrospect, this seems like a relatively minor crisis, since it lasted just two days. But a recent New York Times article suggests that the impact could be far bigger. When Russia cut off natural gas supplies to its neighbor, Western European countries were alarmed, believing that their natural gas supplies would also be disrupted. The worries were understandable -- Russia supplies France and Italy with as much as 30% of their natural gas, and Germany with 40% of its natural gas.

In the crisis' aftermath, many European officials and experts are calling for a reduction in dependence on Russian gas, partly through the development of alternative fuels such as clean-burning coal, nuclear power, and renewable energy. Western European countries have invested or are currently investing in these areas, but that spending could grow. In addition, newer European Union members in Central and Eastern Europe, which are even more dependent on Russia, could be big investors in these areas.

While it's possible that nuclear power players like Cameco (NYSE: CCJ  ) could benefit from the new attitude in Europe, Europeans' strong environmentalist streak is likely to block any major increase in nuclear power production. Instead, companies involved in coal technology, such as Headwaters (NYSE: HW  ) , McDermott (NYSE: MDR  ) , and Sasol (NYSE: SSL  ) , are more likely winners. In addition, big energy companies like BP (NYSE: BP  ) with investments in renewable fuel, along with smaller pure-plays like SunPower (Nasdaq: SPWR  ) , stand a good chance at reaping new business.

It might be tempting to believe that the Russia/Ukraine crisis was just an anomaly with few long-term effects. Skeptics, though, should note that the U.S. has its own potential energy issue in its strained relationship with Venezuela, which provides the U.S. with 15% of its crude oil and now seeks to reduce its dependence on U.S. purchases. Concerns over energy security seem likely to grow rather than subside, and smart investors should be ready to exploit this trend.

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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.


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