With oil back above US$100 per barrel, and threats of a carbon price/tax back on the agenda, smart investors figure that it’s the right time to start looking at alternative energy shares.
The alternative energy space is a big space. On the Australian sharemarket there are more than 50 companies that broadly operate within the alternative energy sector.
The biggest and closest to commercialisation are the solar and wind sectors. But we’ve yet to see any long-term share winners from the sectors.
There are also companies trying to harness marine energy through waves.
There has also been a strong focus on the transport energy sectors. These include firms that are producing biodiesel and ethanol.
The production of energy efficient fuel cells, such as those produced by Ceramic Fuel Cells (CFU), has potential over the long term as a low carbon alternative to producing energy.
The geothermal sector also as its supporters, with some analysts saying that the geothermal companies have the greatest potential should they be able to harness their hidden underground energy.
What to look for
However, it’s tough to know which stocks you should buy and which you should avoid.
The majority of companies are all pitching the same story: revolutionary technology that is just minutes away from commercialisation.
However, the results have been a long time coming. And some of the companies that have come close have found that to be successful you need to do a whole lot more than just produce energy. You also need success in the cutthroat world of alternative energy capitalism.
For this reason, investors need to look at a multitude of factors. How much does the technology cost up front? How costly is the energy produced? How it positioned for government subsidies? When are they likely to get to market? And, most importantly, does it even work?
In Australia, there are a number of listed companies that are currently vying for the mantle of Australia’s leading alternative energy company.
Ceramic Fuel Cells (CFU) is one of the more advance producers of energy efficient fuel cells. The company was formed from a unit of the CSIRO in 1992 and listed on the ASX in July 2004.
The company develops fuel cells that generate energy from hydrogen rich fuels through a hydrochemical reaction.
CFU says their solid oxide fuel cell technology can achieve up to 60% electrical efficiency using natural gas and can reduce carbon dioxide emissions by more than 60% compared to coal fired electricity generation.
Also generating fuel cells, but rather cells that derive their energy from the sun, Dyesol (DSC) makes dye-sensitized solar cells. The company was founded in 1995 and listed on the ASX in 2005.
According to the company, dye-sensitised solar cell technology is best described as ‘artificial photosynthesis’.
The company uses an electrolyte, a layer of titania (a pigment used in white paints and tooth paste) and ruthenium dye sandwiched between the glass. As light hits the cells, the dye excites electrons, which is then absorbed by the titania and becomes an electric current.
On the wind energy front, it’s been a tough time for Infigen Energy (IFN), which has struggled in recent years.
The stock had performed well in share price terms in its previous incarnation, when it was known as Babcock and Brown Wind Partners.
However, despite becoming the best performer of the dysfunctional Babcock and Brown family as the companies collapsed during the GFC, the stock was still heavily in debt and has experienced steep losses for shareholders in recent years.
The company has strong wind-generating assets in Australia, the US and Germany, but is still yet to show any sign of share price recovery.
Another sector that is aiming to be the leader in this new technology is geothermal energy. The company grabbing the attention in this sector is Geodynamics (GDY).
GDY looks at enhanced geothermal systems, which was previously known as hot fractured rock geothermal energy.
The company is the largest listed company in the sector. Enhanced geothermal energy is produced using heat extracted from underground basaltic rocks by circulating waters through an artificial reservoir or underground heat exchanger.
According to GDY, this could provide a massive source of carbon-free renewable energy.
Finally, alternative energy technology is looking to harness the power of waves. On the local market, the leading proponent is Carnegie Wave Energy (CWE).
CWE uses its own technology and aims to develop Australia’s first commercial wave energy unit. The unit will be based in near Garden Island, Western Australia.
The company says it is different to its competitors because its technology is fully submerged and generates power onshore rather than offshore. CWE says the technology has been proven at pilot scale and is now in its commercial demonstration phase.