The next Internet-sized boom

By Michael Brush

Move over, Google. There's a new Big Trend on the way. And this one could produce even more wealth than the Internet for those who play their cards right.

I'm talking about green energy. And if you're among the skeptics who think alternative energy is a do-gooder investment best left to tree huggers, insanely high oil prices should change your mind.

These days, the "green" in alternative energy is cold, hard cash. Early leaders in the space are quietly raking in millions, if not billions:

• Suntech Power Holdings (STP, news, msgs) chief Zhengrong Shi, who is in his mid-40s, is worth at least $2 billion. He owns 57.9 million shares of Suntech, which recently traded for $34.50 a share.

• Since late 2006, insiders at First Solar (FSLR, news, msgs) have cashed out $1.3 billion worth of stock options. Chief Michael Ahearn alone has grossed $691 million. Together, the insiders exercised options at $2 to $4 a share and sold much of their stock in the $200-to-$300 range, so most of that is pure profit, at least before taxes.

There are many more examples. Savvy players are amassing enormous fortunes even though we're in the very early stages of the trend, says Ira Ehrenpreis, a partner at venture capital firm Technology Partners. He thinks green energy is at the point information technology was in the mid-1970s.

That was before the PC, before big techs such as Intel (INTC, news, msgs), Cisco Systems (CSCO, news, msgs) and Microsoft (MSFT, news, msgs) made millions and billions for investors and insiders, and well before the Internet spawned Google (GOOG, news, msgs). (Microsoft owns MSN Money.)

• Video: T. Boone Pickens' wind energy plans

Fast-forward 10 years from now, and the renewable-energy space will have 10 companies that rival the size of ExxonMobil (XOM, news, msgs), which has a market cap of about $450 billion. That's the bold prediction of Nancy Floyd, who has a rare perspective as a founder of Nth Power, the first venture capital firm to invest primarily in green energy, starting in 1997.

If that sounds far-fetched to you, I don't blame you. But even if oil prices come down -- and I expect they will, for a bit -- at least three trends will continue to pump life, and money, into green energy. They are:

• A growing scarcity of fossil fuels compared with sharply rising demand.

• The need for energy independence to make the U.S. less reliant on foreign sources of oil.

• Upcoming policy changes in the U.S. that will force companies to pay dearly for carbon emissions.

Huge demand, big investments

Think higher demand for oil from emerging economies such as China and India has pushed energy prices out of sight? You ain't seen nothin' yet. By 2030, world energy demand will be up an additional 50%, according to the International Energy Agency and the U.S. Department of Energy.

Few experts expect supplies to keep pace.

Green energy has the potential, at least, to make up the difference. Each day, for example, the sun hits the earth with 6,000 times the energy mere humans use. "There's an infinite amount of it compared to what we need," says Michael Eckhart, the president of the American Council on Renewable Energy. Besides solar, green energy sources include wind and the geothermal heat inside the earth.

To tap those sources , investors pumped $148 billion into clean energy development last year, compared with $33.4 billion in 2004, according to Michael Liebreich of New Energy Finance, a London company that tracks investment in the space. But that $148 billion was just 10% of the overall investment in energy. Liebreich thinks the amount put into clean energy could grow to $450 billion in five years.

Those numbers don't even include what big companies like General Electric (GE, news, msgs) invest internally to develop green technology. General Electric is one of the big wind-turbine producers.

T. Boone Pickens farms the wind

Solar is the big investment play in green energy at the moment, but wind is not far behind. Astonishingly, 35% of electrical generating capacity built in the U.S. last year is powered by wind. That was second only to natural-gas plants, which made up 41% of capacity added last year. The big states for wind farms are Texas, California, Minnesota and Iowa.

About $9.4 billion was invested in wind capacity last year, and that is expected to grow to $16 billion this year, says Randall Swisher, the executive director of the American Wind Energy Association. "This isn't alternative energy anymore," he says. "This is very mainstream."

If you doubt that, consider that lifelong Republican and conservative oilman T. Boone Pickens is building a $10 billion wind farm in Texas that should start generating power by 2011. Wind is an "unbelievable asset that's not been touched" and a good way to reduce dependence on foreign oil, he's told the news media.

The 'cap and trade' hammer

Yes, the pundits still debate whether carbon emissions are to blame for global warming, But analysts at Goldman Sachs (GS, news, msgs), no hotbed of liberalism, think climate change is real and a really big investment trend.

Continued: 'Planetary emergency'

 1 | 2 | next >