What does $50 Oil Mean for Clean Tech?

Earlier this year when oil was on track to reach $150/bbl, it was hard to find an investor class not interested in clean tech. Jim Cramer was recommending stocks that should profit from the boom in wind power generation, which he cleverly nicknamed his “Windex.” A solar ETF was introduced earlier this year on the NYSE with the ticker TAN. Hedge funds and banks lined up to loan money for ethanol and biodiesel refineries. Private equity shops, which had built portfolios of coal and gas fired power plants during deregulation, were setting their sights on geothermal, waste-to-energy, wind, and PV generation. The venture capital industry placed faith, resources and money behind clean tech as the “next big thing.”

Both Presidential candidates have continued to stump for Cap and Trade as well as for government funding of alternative energy research and infrastructure projects, like a new version of JFK's Space Race or FDR’s CCC and WPA. However, does a return to cheap fossil fuels spell the end of our clean tech revolution?

Unavoidably many alternative energy infrastructure projects will be canceled, promising companies will fail, and new technologies will be starved for capital. Public support may wane after November as consumers see their monthly gas bills drop. Indeed, the next President will find it difficult to implement his clean tech vision with no money available in Federal or state budgets and with traditional industries in financial distress. We have seen the short memory of the American consumer before, and broken political promises are a way of life to us.

Yet, I am optimistic. High fuel prices may have pushed the conservation movement to the mainstream in America, but we have simply caught up with the rest of the world. Lower fuel prices will not reduce our dependence on foreign oil, and more Americans understand how our foreign policy has been perverted by the need to maintain access to oil imports. Moreover, the impact of global warming and the health effects of pollution seem more real to Americans than in the past. I do not think we will collectively unlearn these lessons as fuel prices decline.

Furthermore, I am bullish on fuel prices once global economic activity picks up. Oil at $50/bbl will be a temporary reprieve and, in fact, will stimulate economic activity; Peak Oil remains a reality we must face. The economies of China and India remain thirsty for fossil fuels, and developed nations must evolve their energy infrastructure and conservation measures in order to maintain their standard of living in the twenty first century.

The future of clean tech, thus, remains bright. Venture capitalists will come to terms with longer investment horizons; lenders will learn the importance of hedging input and output prices; and private equity firms will have opportunities to acquire distressed infrastructure assets. Most importantly, governments must have the foresight to recognize that lower fossil fuel prices are only temporary, and that true vision and leadership are needed in energy policy. Maybe I will outline my own unsolicited public policy suggestions for the next President soon.