Europe's Non-Fossil Fuels Receive Boost From Oil: Matthew Lynn
Oct. 27 (Bloomberg) -- Non-fossil fuels are finally getting the boost they need to become a feasible long-term solution to the world's dependence on oil.
Surging crude prices won't wean Europe or the U.S. off their addiction to imported oil in the near future. Yet they will help redirect capital to other energy sources for the next generation.
Last week, Electricite de France said it would build a new type of nuclear reactor in Flamanville, France. According to Pierre Gadonneix, the chairman of EDF, the plant will ``contribute to ensuring Europe's energy independence in the coming decades.''
In Finland, work has already started on a new nuclear power station, which will be the first completed in Europe since the Chernobyl disaster in 1986. The plant is scheduled to start operating in 2009.
Britain is thinking about whether to build a new generation of nuclear stations to replace three-decade-old plants that are nearing the end of their useful lives.
Nuclear energy accounts for 32 percent of the European Union's electricity production. That figure is bound to rise over the next few years. After a decade during which nuclear energy was considered too expensive or environmentally unsafe, it has now forced its way onto the agenda.
And it's not just nuclear power. Capital is pouring into companies that are developing any kind of alternative to pumping lots of black, sticky stuff out of the ground.
IPO Rush
``High oil prices increase the attraction of non-conventional energy sources,'' said Credit Suisse First Boston in a recent note to investors. ``These include heavy oil, gas to liquids, and liquefied natural gas, as well as alternative energy sources such as fuel cells, solar and wind power.''
In London, there has been a rush of initial public offerings by alternative-energy companies.
ITM Power Plc sold shares in June to develop its fuel-cell technology. Fuel cells generate electricity by combining hydrogen and oxygen, producing only steam or water as byproducts.
Ocean Power Technologies Inc., which makes equipment to generate power from waves, listed its shares in London last year.
And D1 Oils Plc this month announced plans for an IPO. It hopes to raise 13 million pounds ($24 million) to make diesel fuel from vegetable oil -- the money will be used for plantations of Jatropha Curcus, a tree that produces oil-bearing seeds.
Investors have started to take notice. ``A lot of companies had promised a lot and not delivered,'' said Charles Hall, a director of London-based Westhall Capital Ltd. who specializes in alternative-energy companies, in a telephone interview. ``People were starting to lose faith. Not until this summer did they start to get that back again.''
Canadian Flop
Investors have also been burnt. Take Ballard Power Systems Inc., which also makes fuel cells. The Burnaby, British Columbia- based company's shares soared to C$189 in 2000 as investors got excited about the prospect of the big carmakers using Ballard's equipment. The stock now trades for less than C$10.
That's in the nature of the investments. These are all technology companies, which are always risky.
And oil prices prompt serious questions, too. Is almost $55 a barrel a speculative bubble? Or does it represent a permanently high price that consumers will have to adjust to? Many alternatives look appealing with oil at current levels. At $30 a barrel, people would stick to the black stuff.
Nuclear energy has a bad image because it can be expensive and is seen as dangerous. France's Areva SA, the world's biggest maker of nuclear reactors, has to battle constantly with protesters who obstruct its plutonium shipments.
Nuclear Energy
Yet, it is a well-established technology with a stable cost base. And, with the exception of Chernobyl, none of the reactors have caused a disaster, even after 30 years of operation in some cases. That's enough of a track record to suggest they aren't as unsafe as some people imagine.
Wind and solar power are more environmentally friendly, though there is scant evidence that either can be a major alternative. Fuel cells powered by hydrogen are the big hope. Nobody has made them cheaply or efficiently enough yet -- but that doesn't mean they won't soon.
Expensive oil will lead to more exploration and efficient exploitation of resources. Yet it will also encourage investors to hand over money to any bright scientist who can think of another way to make energy. And it is prompting smart young entrepreneurs to move into the area.
Capital is shifting into the alternatives to oil. As long as crude prices remain at current levels, other energy forms will be attractive for investors.
To contact the writer of this column:
Matthew Lynn in London at matthewlynn@bloomberg.net.
Oct. 27 (Bloomberg) -- Non-fossil fuels are finally getting the boost they need to become a feasible long-term solution to the world's dependence on oil.
Surging crude prices won't wean Europe or the U.S. off their addiction to imported oil in the near future. Yet they will help redirect capital to other energy sources for the next generation.
Last week, Electricite de France said it would build a new type of nuclear reactor in Flamanville, France. According to Pierre Gadonneix, the chairman of EDF, the plant will ``contribute to ensuring Europe's energy independence in the coming decades.''
In Finland, work has already started on a new nuclear power station, which will be the first completed in Europe since the Chernobyl disaster in 1986. The plant is scheduled to start operating in 2009.
Britain is thinking about whether to build a new generation of nuclear stations to replace three-decade-old plants that are nearing the end of their useful lives.
Nuclear energy accounts for 32 percent of the European Union's electricity production. That figure is bound to rise over the next few years. After a decade during which nuclear energy was considered too expensive or environmentally unsafe, it has now forced its way onto the agenda.
And it's not just nuclear power. Capital is pouring into companies that are developing any kind of alternative to pumping lots of black, sticky stuff out of the ground.
IPO Rush
``High oil prices increase the attraction of non-conventional energy sources,'' said Credit Suisse First Boston in a recent note to investors. ``These include heavy oil, gas to liquids, and liquefied natural gas, as well as alternative energy sources such as fuel cells, solar and wind power.''
In London, there has been a rush of initial public offerings by alternative-energy companies.
ITM Power Plc sold shares in June to develop its fuel-cell technology. Fuel cells generate electricity by combining hydrogen and oxygen, producing only steam or water as byproducts.
Ocean Power Technologies Inc., which makes equipment to generate power from waves, listed its shares in London last year.
And D1 Oils Plc this month announced plans for an IPO. It hopes to raise 13 million pounds ($24 million) to make diesel fuel from vegetable oil -- the money will be used for plantations of Jatropha Curcus, a tree that produces oil-bearing seeds.
Investors have started to take notice. ``A lot of companies had promised a lot and not delivered,'' said Charles Hall, a director of London-based Westhall Capital Ltd. who specializes in alternative-energy companies, in a telephone interview. ``People were starting to lose faith. Not until this summer did they start to get that back again.''
Canadian Flop
Investors have also been burnt. Take Ballard Power Systems Inc., which also makes fuel cells. The Burnaby, British Columbia- based company's shares soared to C$189 in 2000 as investors got excited about the prospect of the big carmakers using Ballard's equipment. The stock now trades for less than C$10.
That's in the nature of the investments. These are all technology companies, which are always risky.
And oil prices prompt serious questions, too. Is almost $55 a barrel a speculative bubble? Or does it represent a permanently high price that consumers will have to adjust to? Many alternatives look appealing with oil at current levels. At $30 a barrel, people would stick to the black stuff.
Nuclear energy has a bad image because it can be expensive and is seen as dangerous. France's Areva SA, the world's biggest maker of nuclear reactors, has to battle constantly with protesters who obstruct its plutonium shipments.
Nuclear Energy
Yet, it is a well-established technology with a stable cost base. And, with the exception of Chernobyl, none of the reactors have caused a disaster, even after 30 years of operation in some cases. That's enough of a track record to suggest they aren't as unsafe as some people imagine.
Wind and solar power are more environmentally friendly, though there is scant evidence that either can be a major alternative. Fuel cells powered by hydrogen are the big hope. Nobody has made them cheaply or efficiently enough yet -- but that doesn't mean they won't soon.
Expensive oil will lead to more exploration and efficient exploitation of resources. Yet it will also encourage investors to hand over money to any bright scientist who can think of another way to make energy. And it is prompting smart young entrepreneurs to move into the area.
Capital is shifting into the alternatives to oil. As long as crude prices remain at current levels, other energy forms will be attractive for investors.
To contact the writer of this column:
Matthew Lynn in London at matthewlynn@bloomberg.net.
No comments:
Post a Comment