The first oil shock of the 21st century has eased since the summer's highs, allowing motorists and businessmen to breathe a little more easily. But that's not the case for those in renewable energy, whose fortunes have waxed and waned with the price of oil. Will those stocks fare better this time around? To find out, the Monitor's Laurent Belsie sat down with two Boston-based experts on green energy: Jack Robinson, founder of the Winslow Green Growth Fund, and Eric Becker, portfolio manager of Trillium Asset Management. Here are edited excerpts of their conversation:
Green-energy stocks have pulled back in recent months. Are you worried?
Robinson: About a third of our portfolio is committed to that space. Obviously, with the stocks pulling back, almost directly correlated to the price of oil pulling back, our overall portfolio has declined a bit. But over the long haul, we think the trends are in place so it really makes a lot of sense to have a lot of exposure.
Becker: This pullback is probably an opportunity for long-term clean energy investors. Speculators have probably been driven out of the market.... But if you have a longer term horizon there's probably money to be made from here. The Department of Energy forecasts a gap of 14 terawatts of power globally between now and the year 2050. That's the equivalent of 14,000 1-gigawatt new energy plants. If you opened one a day, it would take 38 years to get there. So the problem is not going to be solved with nuclear and fossil fuels alone.
Such predictions were made in the early 1980s, too, but green-energy stocks crashed. Is this era really any different?
Robinson: From our point of view, it is actually very different. There are multiple factors at work here. Eric has mentioned one, which is the demand-supply equation is going to continue to be out of whack.... Another factor ... and new to the equation - is global warming and our overall awareness of that. We simply have to come up with ways to reduce our carbon output - not only in this country but around the world. And that in and of itself is going to be a major, major driver for green-energy stocks.
But the United States and China have refused to cut greenhouse gas emissions.
Becker: I think the political will is building for action. There are bills in Congress for carbon-emissions caps in the US. You've now got the eight Northeast states and California agreeing to cap their emissions. And you've got 165 countries signed on to Kyoto. I think there's no doubt, given the data we're seeing on climate change, that all the countries on the planet are going to have to deal with this issue.
Are there any particular industries that get you excited?
Becker: Certainly solar gets me excited. When I started in the social investment world about 13 years ago, solar was viewed as a technology that was too expensive. It wasn't really going to have an impact.... But solar has made great strides and with the increase in fossil fuel prices, it's now much more competitive and is much more compatible with a world where energy is created in a distributed way. Distributed energy [means] producing it where it's used as opposed to in central locations and then distributing it across a grid. Particularly in the developing world where you can build a new power plant quickly, cleanly, and at the right scale with solar, and you don't need to build a grid, that's pretty attractive compared with the big cost of plunking down a new, large power plant and building a distribution grid for it.
Robinson: There are multiple answers to the problem here. Solar is a key one. Wind today is producing probably half of the green energy that's produced in the world. But besides that there's a broad range of things going on: things like ultracapacitors, which is basically a super battery that doesn't have toxic issues and is being used in hybrid cars. There are a couple of manufacturers of these around. It's a whole new industry that's blossoming.
Do any green-energy companies stand out?
Robinson: I just mentioned ultracapacitors. And there's a company in California called Maxwell Technologies. This is a very core part of their business. Ultracapacitors are being used on wind turbines. They're being used in hybrid cars as they're being advanced. And they're going to be used in forklift trucks. Think about a simple forklift truck – the amount of power you take to lift up the fork is huge. But when you lower it down, you're not recapturing it. And what an ultracapacitor can do is capture the energy as you're going down.... Another large holding in the fund is a company called Zoltek. You've never heard of it, but they make carbon fiber.... It's very strong and it's very light. It's also very expensive. But it is now being used in wind turbines. The force at work there, fiberglass can't absorb it. So carbon fiber is being mixed in [to the blades].
Becker: There are some profitable companies. One that I like is a geothermal company called Ormat Technologies. It's like a utility. It's an independent power producer selling to utility companies using this clean energy.... That's one to look at because it has very stable earnings.
Should ethical investors plunge into this field – or test it cautiously?
Robinson: That's a tough question to answer. As part of your portfolio, and depending on your personal level of understanding and commitment to it, certainly a portion of your portfolio should be in green energy. The growth itself in green energy is in excess of 20 percent annually in the aggregate. There's very little unit growth frankly in fossil fuel energy today. If you're looking for growth and you're looking for green alternatives, a diversified portfolio in green energy makes sense.
Becker: Don't put all your eggs in one basket. A lot of these stocks are speculative. [But] the PowerShares exchange-traded fund, called the PowerShares WilderHill Clean Energy Portfolio, represents about 40 stocks in one security. [It's] a way of quickly diversifying one's portfolio into clean energy. But again, it should be viewed in the broader [context of] one's portfolio. Clean energy should be a portion, but it's still a risky area.
Watch the conversation online at csmonitor.com/ethicalinvesting.