Thursday, August 19, 2010

Is Alternative Energy An Alternative Investment Option?

image One of the major issues facing our society today is global warming and the accompanying fear of slowly squandering the limited natural resources available on our planet. We all know that oil is a limited resource. But we also know that if we don’t find alternative sources of energy, the world as we know today it will no longer exist. That’s why alternative energy exchange traded funds (ETFs) are so tantalizing to think about. There is so much discussion about the older energy sources such as coal, oil and natural gas that have been moving our economy for decades. Climate change discussions as well as rising commodity prices have helped bring alternative or renewable energy discussions to the front table.

The problem of course is that these new energy sources are often much more expensive and while that may change in the future, it is not clear how much time it will take. Another important factor when it comes to energy is government regulation. Other sectors are relatively free of government interference as long as they obey the basic laws. Governments have put their money where their policy is by granting huge financial incentives to alternative energy companies but with financial support comes regulations. Energy including Alternative energy is seen as something with national security implications and is keenly under the radar of most governments. Since there's no way to know how the governments would react in the future, it adds a good deal of risk to any alternative energy investment.

As an investment perspective, recently, with the drastic drop in oil prices, alternative energy funds have suffered. It should not come as a surprise that coal related stocks and ETFs have continued to be on of the best performing sectors this year. Considering that alternative energy is yet to produce sensible economics, oil and coal continue to be cheaper to use than alternative energy. Another basic disadvantage that holds true for most of the alternative energies is that their supplies are mostly dependent on nature and thus are not constant.

Hydrogen- The cheapest way to produce hydrogen for fuel cells is by using natural gas, a non-renewable resource that creates greenhouse gases when burned. Hydrogen can also be made from water, but this is expensive and widespread adoption of this practice could threaten

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