Is Green Energy the Next Big Bubble?
Obama’s plan is to reduce oil consumption by making buildings more efficient through insulation, energy efficient CF light bulbs and by other means. The other part of the plan is to produce energy domestically through solar and wind.
This second part of the plan may lead to speculation as seen during the internet bubble and during the housing bubble.
Recently the U.S. recently took the lead in wind power generation surpassing Germany. http://www.bloomberg.com/apps/news?pid=20601100&sid=a5qyeN9A6LlY&refer=germany
Solar is also on the increase with massive solar energy farms being added to the desert. Without government tax incentives, these projects would probably never have happened.
In its current state, solar is expensive and has a long break even period. If the U.S. were to implement this on a large scale such as that in Germany, it would increase the cost per kwh during a recession when every dollar is important.
Everyone likes the idea of clean, renewable energy but when it comes to paying for it, we may be in for some sticker shock.
The cost to outfit just one small home with solar costs about $12K-$20,000. On a $20K system, even at a low interest rate of 5%, the interest would be about $1K a year and pricipal payments of about $1000 a year. For most, this is more than the cost of purchasing electric directly from the electric company. These payments would have to be made for about 20yrs.
While calculating the cost of solar out for my own home here in sunny Las Vegas, I found that it wasn’t a good investment. Without a lower price or govermentment incentives, my break even period was close to 20years. Even when comparing several different scenerios such as rising electric rates, the payoff period was still nearly 17years with no guarantees regarding performance.
And when the system is paid off in 20yrs, the warranty for the system goes away and the system starts to become less efficient.
So far, green energy stocks have been hit by bear market just as other stocks have been hit but that may change if more public money starts to flow into green energy projects.
Will it be the next bubble, who knows?
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