E&Y: Alternate energy investments could slow

The credit crunch and falling oil prices could dampen investment in alternate energy companies until stock markets again stabilize, said speakers Oct. 9 at an Ernst & Young energy forum.

Paula Dittrick
Senior Staff Writer

HOUSTON, Oct. 10 -- The credit crunch and falling oil prices could dampen investment in alternate energy companies until stock markets again stabilize, said speakers at an Ernst & Young energy forum on Oct. 9.

Despite investment momentum for solar, wind, and other alternate forms of energy, a continued downturn in oil prices eventually is apt to make lenders and investors more reluctant, said Dan Pickering, head of research for Tudor, Pickering, Holt & Co.

Before the credit crunch started, alternate energy was very popular in the US, he noted.

"The perception of the American public is alternative energy is very sexy to fund and very cool to do," Pickering said. "But don't forget about grandpa. Grandpa is conventional energy."

Alternate energy still needs traditional fossil fuel as a backup for days when the sun does not shine or the wind does not blow, Pickering said.

Access to capital
Joseph Muscat, Ernst & Young Americas director of venture capital, said access to capital could become more difficult for alternate energy companies. For instance he noted that initial public offerings for such companies essentially stopped in July.

Venture capital funds are attracted to clean technology energy companies, Muscat said, adding that only software companies get a bigger share of global joint venture investment than clean technology energy companies.

On a US level, Muscat noted that government subsidies and tax credits for renewable energy appear to be here to stay. The $700 billion federal bailout package recently approved by the US Congress renewed subsidies and tax credits for wind, solar, and biofuels.

President George W. Bush signed an 8-year extension of tax credits for investments into solar energy and a 1-year extension for investments into wind energy.

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