Alternative Energy a Laggard Until Natural Gas Enters Secular Bull Market

Montreal, Canada

Is alternative energy marking a comeback after peaking in 2007? Or is this just a bear market rally after trading at basement levels?

Buying alternative energy, particularly solar, was a smart move at the beginning of 2011 and especially immediately following the tragic events of March 11 in Northern Japan.

There’s no doubting the events still unfolding in Japan’s worst post-WW II disaster will have positive implications for alternative sources of energy, including traditional and alternative. The markets agree with sizable gains posted over the last four weeks in solar and wind energy stocks.

Also, the marked gains clocked by Germany’s Green Party in regional elections this month should reinvigorate the depressed solar industry in that country following widespread demonstrations against nuclear power after the tragic events in Fukushima. Germany’s Merkel government even suspended expansion plans for nuclear power in March.

Though these and other events lend to the ongoing rally in solar and wind power, the odds they’ll last are unlikely.

Wind power generation, and its sister, solar energy – are much more expensive than heating oil or natural gas. Without government subsidies, I doubt many companies would still be in business. The United States isn’t helping alternative energy, either, still lacking a broad-based national energy policy since the Obama administration entered the White House.

The big obstacle to widespread solar energy consumption is its high cost and the failure of these modules to store sufficient sums of power once the sun fades. Without wind, those big, heavy blades go nowhere and therefore, no energy generation.

But even worse, low natural gas prices are an incredible hurdle for legitimizing alternative energy usage; it’s impossible for solar or wind to compete with natural gas at $4 BTUs. No government subsidies can justify conventional solar or wind power consumption. Until natural gas enters a long-term secular bull market like crude oil, it’s almost lights out for solar and wind power over the short to intermediate-term.

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