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More than 100 renewable energy stocks are now traded worldwide, with a combined valuation of more than £35 billion, and it seems that alternative energy is generating a speculative frenzy. Even after the recent stock market correction, shares in ethanol group Renova trade on more than 60 times earnings – a multiple not seen since Mr Blodget was testing the language filter on his corporate email account.
But there is a key difference between the renewables of today and the dotcoms of old. New energy companies are supported by people who are generally more reliable than investment bank analysts, or at least have bigger reputations to lose: business and political leaders. Businesses hit by rising oil and gas prices are turning to renewables as an alternative. A report by the Carbon Trust found that the value of UK investment in clean energy between 2000 and 2004 reached £1 billion. Politicians, too, are quickly turning green. At the last election, the nearest carbon emissions came to the news agenda was when protestors unfurled a banner on John Prescott’s roof saying: ‘Oi, Two Jags, Hit Targets, Not Voters’. Last week the new Environment Secretary and alleged Prescott successor David Miliband announced tough emissions targets that were welcomed by, of all people, the chairman of Shell UK. It’s a policy that’s unlikely to be reversed by glacier-loving Dave Cameron.
For investors, then, this sector offers a real opportunity to invest ethically — and end up cycling all the way to the bank. There are now six renewable energies you can invest in via Aim. The first is biomass — fermented vegetation and manure, used to generate methane — which is likely to account for the largest proportion of the 3,650 megawatts of installed generating capacity per year (enough to power three Birmingham-sized cities) expected from renewable projects. Stocks to watch are AgCert and Alkane Energy. Next comes bioethanol, a petrol substitute made from vegetable matter. In Brazil most cars already run on a 25 per cent ethanol mix. In the US Bill Gates has invested $84 million in ethanol plants. Stocks to watch here are Biofuels, Renova and D1 Oils.
Then come wind, waves and the heat of the sun. Electricity generated by wind turbines is now worth £5.5 billion a year, and the names to note are Clipper Windpower, Novera, Monkton and Renewable Energy Holdings. Demand for solar power from photovoltaic panels has grown at 25 per cent a year for the past 15 years; stocks to watch include Romag, PowerFilm and Solar Integrated Technologies. Commercial development of generation from tidal turbines is at an earlier stage, but keep your eye on Ocean Power Technologies and, again, Renewable Energy Holdings.
Finally, fuel cells are devices that convert energy in hydrogen and other renewable gases into a form that can power vehicles or electronic equipment. One British company, Ceres, has produced a cell that can generate enough power to run the average home. Others to watch are CMR and Ceramic Fuel Cells.
Alternatively, if you don’t want to get bogged down in biomass, you can invest indirectly. Specialist venture capital trusts — such as Ventus and Keydata Income — offer pure exposure to windpower. And environmental investment trusts such as Impax and F&C Stewardship buy shares in a range of alternative energy developers. Even Merrill Lynch has a fund, New Energy Technology, which suggests it has learnt one thing from Henry Blodget: where there’s muck, there’s brass.
Matthew Vincent is editor of Investors Chronicle.
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