New Energies Come of Age Amid Fuel Crisis

New Energies Come of Age Amid Fuel Crisis

The sun is rising on a new era of energy sources as the sun sets on this Palm Springs, Calif., wind farm.

Engines race in Europe's lines for dwindling gasoline supplies, but the energy industry and its backers are listening to something else — the whoosh of wind turbines and the gentle whir of fuel cell engines.

Mark Moody-Stuart, chairman of the oil giant Royal Dutch/Shell Group, was in Munich Monday promoting fuel cell technology while farmers and truckers blocked his firm's UK refineries and left half his gas stations dry.

"All of us want, if possible, to quickly introduce hydrogen technologies and reap their benefits, environmental and financial," said the career oil man, who is also chairman of the G8's Renewable Energy Taskforce.

Earlier this summer, while crude oil climbed above $30 a barrel with OPEC output tight and U.S. fuel inventories low, another oil giant, BP Amoco, was busy throwing off its oily overcoat.

"Beyond Petroleum" was its new mantra, as it pledged extra investment to maintain its position as the world's biggest producer of solar energy.

The new emphasis could easily be dismissed as more style than substance.

Combined net profit at Shell, BP and Exxon Mobil Corp. -- the world's top three non-state oil producers outside OPEC -- is set to top $18 billion this year.

Capital investment will approach $30 billion, leaving the few hundreds of millions of dollars they are investing in energy innovations barely on their finance directors' radar screens.

But if anybody can make the energy revolution happen, it will be the industry giants.

"They have to, because stock markets want growth and there's no growth left in the oil sector," said one investment banker with long-standing industry connections.

Fund managers agree, and are already building investment frameworks for smaller, leaner innovators if the growth engines of the 20th century fail to drive through the opportunities of the 21st.

It's My Mountain

"This is not an ethical investment opportunity, it's a straightforward business opportunity," said Merrill Lynch's Robin Batchelor, on a roadshow this week promoting a special new fund to invest in pure energy technology companies.

Batchelor says the energy sector has lacked appeal to investors in recent years because of heavy regulation, low growth and an unfortunate tendency to be highly cyclical -- as witnessed this week as crude oil prices ramp up toward $35 from less than $10 early last year.

"Now environmental pressure, industry deregulation and advances in technology are about to change that," said Batchelor, who has identified 300 companies worldwide whose aim is to develop wind, solar and wave power technologies and to advance capabilities in energy storage, conservation and on-site power generation.

"This (crisis) is focusing people's attention, particularly on the renewables side, where its all indigenous," he said.

"It's my mountain I put my wind turbine on, my coastline generating wave power, and the sunshine falling on my country that I'm using for photovoltaics or solar," he said.

"As that grows, you're taking some of that power back from OPEC."

Fuel cells produce energy through electrochemical reactions rather than combustion. Early prototypes convert methanol, gasoline and natural gas to produce the hydrogen fuel they need and investors are already warming to the prospects.

Publicity about the Mark 900 fuel cell system of Ballard Power Systems produced a frenzy on the Toronto stock exchange earlier this year, taking its stock price to a peak of 190 Canadian dollars from below 40 at the start of the year.

Ballard has teamed up with DaimlerChrysler AG and Ford to develop cells for motor car use.

Some fuel cell prototypes are already in action -- albeit supporting more traditional electric vehicles.

Last week Astris Energi, a developer and manufacturer of fuel cell power systems, said it would be able to demonstrate a fuel cell power plant in a golf cart next spring.

Wind Power Competitive Already

Outside the automotive sector, wind power is already becoming commercially competitive and investment is pouring in now that the United States and some Western European countries have set specific targets for a market share for renewable energy.

Denmark leads the field with plans for 45 percent wind power by 2030, although worldwide, despite 13-fold growth since 1990, offshore and onshore wind power still accounts for only 0.4 percent of world electricity supply, according to International Energy Agency (IEA) figures.

The IEA says wind farms are already producing at between three and 10 euro cents per kilowatt — making the best performing farms as cheap as gas power generation and all of them competitive with coal and hydro.

Photovoltaics have some progress to make, with just 0.007 percent of current world energy supplies, but prototype business and residential developments in Britain, Germany and elsewhere are already generating 15 percent and more of their experimental communities' electricity needs.

One of the oil industry's wisest heads had his say last week.

"The stone age came to an end not for a lack of stones, and the oil age will end, but not for a lack of oil," Saudi Arabia's former oil minister Sheik Ahmed Zaki Yamani told Reuters in an interview.