Alternative energy ideas power down

Billionaire oilman T. Boone Pickens put his massive wind-farm plans on hold in Texas. A Maryland solar-plant project has been scrapped. And the nation's second-largest ethanol company is under bankruptcy protection.

The alternative-energy sector has run smack into a credit crisis, probably a recession as well, and almost all industry experts think the fourth quarter is going to be worse.

Yet many believe it could emerge from the economic turmoil scarred but stronger. The International Energy Agency in Paris this week predicted green energy will be the second-largest source of global electricity generation before 2015.

"We're in a moment now where people are taking a deep breath and really challenging their business models and really making sure that they'll be able to sort of weather the storm," said Joseph Muscat, Ernst & Young's Americas director of cleantech and venture capital.

"I think we need confidence to return to the overall markets. People have to get a perspective on what will this recession look like," he said.

Until September, cleaner technology was on a roll, collecting some $3.3 billion in venture capital investment during the first nine months compared with $2.6 billion for all of 2007, Muscat said.

Globally, venture capital and private equity investment was $5.8 billion in the second quarter that tumbled 24 percent in the third quarter as the global economy hit the brakes, according to London-based New Energy Finance, a research firm.

When the downturn hit, the credit markets froze up and prices plummeted for oil, coal and natural gas. Retail gasoline prices have fallen nearly 32 percent in past last month and now are below $2 a gallon in several states.

The reality today is that it's more expensive to produce renewable energy than it is from traditional resources, and consumers suddenly strapped for cash will start moving away, said Jerry Taylor, a senior fellow at Cato Institute.

Even proponents are slowing the move toward alternative energy, at least for the moment.

Pickens has delayed a plan to develop a wind farm on thousands of acres in west Texas, citing the drop in natural-gas prices. He even trimmed about $10 million from a renewable-energy campaign he started to promote wind and natural gas.

Last month, BP Solar scrapped plans for a $97 million expansion of its Frederick, Md., plant, citing intense global competition.

Taylor said renewable energy makes economic sense only if it does not need government subsidies. Without it, he said, the renewables can't compete.

Yet energy experts are still banking on a future for renewables.

The International Energy Agency expects the technology to overtake natural gas to become the second-largest source of electricity by 2015.

In a forecast released this week, it based the forecast on an assumption that fossil-fuel prices will climb, costs will fall for renewable technology and supporting government policy.

"Excluding biomass, non-hydro renewable energy sources -- wind, solar, geothermal, tide and wave energy -- together grow faster than any other source worldwide, at an average rate of 7.2 percent per year over the projection period," the agency said.

Renewable-energy trade associations for solar, wind, geo- thermal and hydropower said there are a wide range of potential investors such as pension funds and nonprofit organizations that would invest if Congress tweaks tax and production credits to make them refundable.

"It's just that the economics are just not there with respect to financing. If you free that up, you'll see record growth for solar, in particular in the United States, in 2009," said Rhone Resch, president of the Solar Energy Industries Association.

There are two key issues for the cleaner technology industry: finding new sources and managing energy use, Muscat said.

Going forward, he expects builders to include energy-efficient products that don't cost too much more but will help reduce energy costs. Consumers will start smaller, perhaps with LED lights, fuel cells for electricity generation and even blended petroleum products, he said.

The recovery, he speculated, could be just one quarter or could take longer.

"We are at a very unique moment where I think with a new administration ... one of their top priorities is a comprehensive strategy," he said. "I think we'll see all of those elements of electricity generation -- solar, hydro, wind -- all of those being a part of the solution."