Smart money in alternative energy?Part 2: the solution or solutions configuration?

April 10th, 2007

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Yesterday, in Smart money in alternative energy?Part 1: current energy quandary, we mentioned that:

Hence, the world is now facing a mounting energy problem, which if not solved, will sooner or later lead to a crisis. The good news is, opportunities are found where crisis are. As investors, we have to train our mind to see such opportunities.

Nowadays, as you keep your eyes and ears open, you will easily notice that energy seems to be a hot topic in the business world. Buzzwords including ?alternative energy,? ?renewable energy,? ?bio-fuels,? ?ethanol,? ?nuclear energy,? ?clean coal,? ?conservation,? ?solar energy,? ?wind energy,? ?geothermal energy,? ?hydro-energy,? etc are often mentioned in the press. No doubt, a lot of hot money are pouring into energy related projects and businesses. Therefore, when you see this, you should be under no illusion that we are still basking in a world of forever readily available and plentiful energy.

We (along with the above-mentioned hot money) believe that in the long run, with everything else being equal, energy is going to be more costly. This will have an impact on our current way of life. To put it simply, the problem is that there is not going to be enough environmentally friendly energy to satisfy everyone in the planet. For those who believe in the theory of Peak Oil, their views will be even bleaker indeed.

At this point in time, the world?s energy problem has yet to filter down into the consciousness of the average layperson on the street. When that day comes, it means that this issue is finally making an impact (whether positive, negative or neutral) so real and visible that its effects can be felt in everyday life. As investors striving after atypical excellence, it will be too late to do anything by then. Thus, now is the time to take action.

Now that we understand the problem, what about the solution? This is the tricky part.

Before we plunge into it, the next step is to understand the nature of the solution. Now, we wish to impress upon you one very important concept that you should remember if you cannot recall anything else in this article. That is, this problem is not simply the problem requiring the solution. It is a multifaceted configuration of problems (e.g. Peak Oil, supply constraints, geopolitical instability, environmental concerns, global warming, skyrocketing demand, costs, etc) that require a complementary multifaceted configuration of solutions. Thus, its complexity is not something we (nor anyone else, we believe) can fully understand, let alone address.

In the following articles, we will look further at the energy issue from the perspective of an investor. Stay tuned!