Speculative financing is scarce, and the fossil fuels that were so expensive just one year ago are no longer at stratospheric levels. Our equity analysts believe that solar and wind power industries show the most promise, but even some companies in those sectors are facing a treacherous road to financial success.
On one hand, wind, and solar have virtually no variable cost inputs, which gives them a leg up on coal and natural gas generation facilities. However, the price of electricity fell in the second half of 2008 along with fossil fuel costs. That translates into a direct loss for solar and wind generation facilities attempting to recover their high fixed costs over the life of the assets. Our analysts are more pessimistic on the biofuels industry, with a particularly skeptical view of ethanol as a viable replacement for gasoline.