“Cracking down on greenhouse gas emissions to comply with the Kyoto Protocol would provide economic help for renewable energy technologies, but such initiatives would result in only a 7% market share for renewable energy and a 43% increase in electricity prices in return for benefits that are still very uncertain,” Van Doren says.
Plunkett Research, Ltd., a market research firm in Houston, says venture capitalists invested about $45 billion in alternative energy in 2005 and about $63 billion in 2006. Investments are expected to grow 20% to 30% a year through 2016.
“Concerns about fluctuating oil prices, energy security and global warming continue to fuel investments in alternative and renewable energy technologies,” says Jack W. Plunkett, founder of the company.
He says sales of solar panels grew to about $11 billion in 2005, up from $7.2 billion in 2004 and $5 billion in 2003.
There’s also increasing interest in ethanol. U.S. refining capacity declined about 5% between 1980 and 2005, but demand for gasoline grew about 21% during that period, making ethanol increasingly attractive. But the ethanol industry as it now exists couldn’t exist without government mandates and subsidies.
Nevertheless, the IPO market responded with two ethanol deals.
VeraSun Energy of Brookings, S.D. launched a strong IPO in June 2006, pricing 18.25 million shares at $23, above the originally filed 17.25 million shares at $18 to $20 each. The stock opened at $28, climbed to $30.75 and recently fetched $17.62. Aventine Renewable Energy Holdings of Pekin, Ill. launched its deal two weeks after VeraSun went public. Aventine priced 9.06 million shares at $43 each, the top end of the price range. The IPO opened below the offer price and the stock recently traded at $20.39.
“The ethanol story went from pop to flop in a week,” says John E. Fitzgibbon, Jr. founder and editor of IPOScoop.com. “Oil is down to about $50 a barrel from its high of $78.40 on July 14. Ethanol sounds much like the stories of riches from shale told in the 1960s and 1970s.”
In 2005, Microsoft co-founder Bill Gates invested $84 million in Pacific Ethanol through his investment company, Cascade Investment, and the stock nearly quadrupled. The Fresno, Calif.-based company plans to build at least five production facilities in the Golden State designed to turn grain into ethanol.
The U.S. Department of Energy estimates that 700,000 barrels a day by 2030 in about the limit for U.S. ethanol production from corn, or about 6% of the estimated U.S. transportation fuel market by that time.
“Corn ethanol is more a religion than a reasoned proposition,” Van Doren says. “People are entitled to their religious beliefs, but there ought to be a steep wall between church and state.”