As the fall out continues from the Gulf oil spill, and we don’t just mean in BP’s share price, the repercussions are being felt all over the country like ripples spreading in a pond. We wrote last week about the likely increase in emphasis President Obama would seek to place on renewable energy sources and how we felt a focus on improving the distribution of energy was a better investment than subsidizing wind and solar power projects. Well politicians didn’t get where they are without knowing an opportunity when they see one and trying to take advantage of the moment.
Although cap and trade legislation remains mired in the Senate, emphasis is being shifted to an energy efficiency bill introduced this spring as a half way step toward cap and trade. The idea is to boost efforts to reduce energy consumption by better insulation of homes. According to the EnergyEfficiencyNews, the bipartisan Home Star Energy Retrofit Act of 2010 or ËœHOME STAR’ bill would establish a $6 billion rebate program to encourage consumers to buy energy-efficient appliances and undertake energy efficiency home refurbishment. A two-tier system would provide rebates of up to $3,000 per home for immediate energy efficiency measures such as insulation and equipment, while a second level of up to $8,000 would be available for whole-home retrofits.
No mention has been made of nuclear power plans since the spill started but several programs were announced in the spring to develop new enrichment facilities and to fund some 42 university research projects like next generation nuclear processes, fuel storage and recycling. Although nuclear power is not a direct substitute for oil it is seen as a viable source for electricity for electric cars and attention has shifted in favor of any transport system that reduces dependence on, or consumption of, oil. Shares in makers of batteries and other electric-vehicle components have risen sharply according to a FT article. Tesla, the Californian maker of high performance all electric sports cars, is expected to press ahead shortly with a public share offering. The firm aims to raise between $155m and $178m in the offering, expected to be priced this week. The IPO has generated much attention in spite of Tesla’s modest size and the fact that it is unprofitable. As at the end of March, Tesla had delivered 1,063 of its battery-powered roadsters, which sell for a starting price of about $109,000, but the company lost $29.5m in the first quarter of this year bringing the total to about $290.2m cumulatively since its founding; losses are expected to increase as it develops new models.
Battery makers have also seen a surge of interest with their share prices rising up to double digit percentages in spite of considerable disagreement on growth prospects even in light of the oil spill. Michael Lew, analyst at Needham & Co, estimates that demand for lithium-ion batteries would grow from about $1bn next year to almost $25bn in 2015. But Roland Berger Strategy Consultants warned in a report in February that a bubble was forming in lithium-ion battery production. It said the sector would “conservatively have twice the capacity it needed to supply electric and plug-in hybrid cars by 2015.
As always there will be those with their own agenda keen to use whatever opportunity presents itself to stress the logic of their proposition.