This post over at The Big Picture got me thinking more about how far we are away from a rational market for green investment – public or private. The problem – opacity – or the opposite of transparency for those of you in a negative mood. Sure there are lots of alternative energy technologies that look great when oil is $135 a barrel – but its hard to make a rational case for investment – whether on Wall Street or Sand Hill Road when a market as fundemental as oil can be turned upside down by the actions (or inaction) of a few government officials or foreign oil ministers.
For instance, after driving solar company stocks through the roof, investors have started to figure out that solar is primarily a demand driven business (one that is completely and utterly tied to tax credits) – no federal tax credit – no solar market. And, BTW why solar? Why are we trusting the politicians to make decisions as to what are affordable renewable technologies and not?
Oil – I did a back of envelope analysis of how much marginal pressure the government is putting on oil prices through its management of the strategic petroleum reserve here a few days ago. So, by a.) not releasing oil from the SPR or b.) buying oil from the SRI – the government is driving marginal demand – speculators be damned.
What this underscores is why we need to work to get oil and renewables off the dole. Oil will be particularly difficult given that much of the expense we incur is hidden in externalities and our politicians’ lack of collective spine in dealing with this problem – but that doesn’t make those expenses not real to you and me (or our grandchildren – since they will be paying the bill for current policy).
Without a real effort to clean up the stimulous/response mechanism in the energy market in order to introduce some market calming transparency – its hard to see how the best renewable and alternative technologies get the support they need… or for the smartest and best investors to succeed.