Investing in the Future of Solar

Some of the biggest scumbags I’ve ever met are investment bankers.

I’m not saying they’re all like this. In fact, most I know are actually decent people.

But over the years, I’ve certainly spent a decent amount of time sitting across the table from investment bankers who would sell their mothers into slavery if it meant they could make a buck.

One of my favorite stories involves a time when I went out to lunch at an Italian restaurant in Manhattan to meet with an investment banker who had been making millions pumping the crappiest solar companies he could find.

I remember this guy trying to sell me on a solar stock that I knew was bogus. The company didn’t even exist except on a piece of paper. He desperately wanted me to help him promote this bullshit stock, even offering free trips to the Caribbean and the promise of some very attractive companionship while lounging on his yacht.

Of course, I turned him down, enjoyed the free lunch, and wished him well.

Truth is, I just don’t have time for that nonsense. Never have. But I will tell you this…

Despite what some folks think about investment bankers, there’s no doubt that these guys are insanely smart. And the ones that have longevity are the ones that always come out on top — and squeaky clean, too. These are the folks worth paying attention to.

Energy Darwinism II

Last week, Citibank released a new report entitled, “Energy Darwinism II: Why a Low Carbon Future Doesn’t Have to Cost the Earth.”

In this report, analysts predicted that the global growth of solar could be at least 65% higher than what the International Energy Agency (IEA) has predicted through 2020.

While the IEA forecasts an average global installation rate of 33 gigawatts to 34 gigawatts per year, Citi is forecasting 53 gigawatts per year.

Citi also suggests that wind installation estimates between 2013 and 2020 will average about 54 gigawatts per year, as opposed to the IEA’s estimates of between 38 and 42 gigawatts.

So why are these numbers so different?

It’s hard to say with accuracy, although the IEA has been known to offer projections that tend to fall short of reality. Here are a few examples from the IEA’s numbers in 2000:

• IEA prediction: Non-hydro renewable energy would comprise 3% of global energy by 2020. We crossed 3% in 2008.
• IEA prediction: Worldwide, 30 gigawatts of wind power would be installed by 2010. We actually hit 200 gigawatts in 2010.
• IEA prediction: By 2010, China would have 2 gigawatts of wind power installed. China actually had 45 gigawatts installed by the end of 2010.

Some have also suggested that a bias towards fossil fuel interests has played a role in some of these predictions that have been way off base. I can’t confirm this, but to brush off such a suggestion would be naïve.

Two Choices

Now, the new Citi report isn’t actually about solar projections. Instead, it discusses how the move to limit CO2 emissions will require a massive amount of capital to transition the global energy economy to one that is heavily weighted in renewables and energy efficiency and conservation.

Although I have no interest in discussing climate change in these pages, I will tell you this…

Whether or not you find the data and data analysis on climate change to be sound, the world is aggressively moving to integrate more low-carbon energy alternatives. So you can either bitch and moan about it or profit from it. I have chosen the latter.

And as analysts from Citi suggest, we have two choices:

… the sums of money to be spent on energy (both capital expenditure and fuel) over the next quarter century will be unimaginably large, at around $200 trillion. The energy industry is faced with choices, and in this report, we outline two scenarios: 1.) a business as usual or “inaction” on climate change scenario, and 2.) a different energy mix that offers a lower carbon alternative. We find that out to 2030 the levels of spend are remarkably similar; indeed the “Action” scenario actually results in an undiscounted saving of $1.8 trillion over the period, as while we spend more on renewables and energy efficiency in the early years, the savings in fuel costs in later years offset earlier investment.

Here’s the bottom line: The big investment banks, like Citi, are gearing up for a world that will require more renewable energy installations and new technologies and solutions that will help us mitigate the potential damage that could result from a changing climate.

So here’s a question you should ask yourself…

If you’re looking for data to help you make smart investments in the energy space, should you rely on these data from government organizations and bloated bureaucracies or investment banks that don’t do a damn thing unless it’s going to make them money?

I know where I’m putting my money.

To a new way of life and a new generation of wealth…

Jeff Siegel

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Jeff is the founder and managing editor of Green Chip Stocks. For more on Jeff, go to his editor’s page.

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