That's what this article thinks.

A creed is a statement or confession of belief — usually religious belief — or faith. So actually, I don't think investors should have anything to do with creeds. It should really be about numbers and rational, independent-minded judgement. Beliefs tend not to be based on data.

However the article wisely points out that a shortcoming of carbon trading ". . . is the political blank space that looms after 2012, when the Kyoto agreement expires. Further moves to curb emissions will follow, but if there is a gap, credit values could slump".

This is a very real possibility. But carbon financing is not the premier financial tool for the alternative energy producer. Typically, they can count on various forms of government support (tax credits, feed-in tariffs, quotas, regulations etc.) and last but not least, a high price of oil that prices in their technology. I almost had to eat my hat on oil prices which as I wrote here were in a new trading range - $60 - $80 - when they dropped below $60. Sadly, the price has recovered back to over $60 due to the assasination of a Lebanese cabinet minister yesterday.

The threat of further unrest and war in the Middle East has a very indirect impact on alternative energy's future and will do so for some time.

Now for what the article says on solar costs which I would also contend is not correct . . .

Applied Materials' Mr Gay points out the cost of generating solar power falls steadily over time. The first cells, in satellites, cost about $200 per watt of generating power. By last year the price had fallen to about $2.70 per watt. That equates to a price decrease of about 18% every time production doubles, he calculates. Price decreases come inexorably with volume, he argues, so subsidies simply help to speed the process up by stimulating extra sales.

I'd like to know how the figure of $2.70 a watt is reached, I suspect this is a factory output cost. The best indication of solar prices - that I know - is the Solar Buzz Index. It very clearly shows that in its 4 year history, prices have basically, net-net, not moved from $5.60 in July 2002 to $5.47 this November 2006.

Add to that, the clear fact that although production has increased and indeed quadrupled since 2001, we have not seen the lowering in prices as decribed by this equation - 18% for every doubling. It is the last few years that matter, because before that this was a very tiny industry.

Annual solar pv production figures

2001 - 395 MW
2002 - approx 500 MW
2003 - 744 MW
2004 - 1200 MW
2005 - 1727 MW

Price decreases will come with volume - ordinarily - but the solar market is anything but free. Manufacturers may be banking the price falls for themselves and not passing them onto consumers. The fact is that government intervention through subsidies has actually served to keep prices high because the subsidy has worked in the reverse interest of the consumer to the producer.

All this goes to show that prices of alternative energy will over a long enough time period fall, but nothing like in a straight line and they will go up too on the way down. The worst thing anyone can ever do to alternative energy is to overstate the case. The solar industry's constant recitement of the fact that increased production reduces prices is flat wrong and no amount of repetition will make it any more right. Subsidies have in fact kept prices high because they have made it profitable to stay in a frothy silicon market, when alternative feedstocks to silicon could have been invested in which very likely could have delivered lower costs.

This week's Economist magazine (and it is a magazine, although they pretentiously call it a newspaper!) has a special on investing in alternative energy.

It's very good but it would be boring to tell you what I agree with. So here are a couple of points that I think are incorrect;

The leader says (sorry, a subscription link);

"The cost of wind power has come down from 8-10 cents to 3.5 - 4 cents per kilowatt hour since 1990"

The price of windpower has actually gone up in the last 2-3 years for 2 reasons;

i) Rise in the price of steel - leading to 20 - 25% increase in the cost per installed megawatt of onshore windpower from $1m to 1.2m and even as high as 1.4 m.
ii) Backup costs have risen. Although these are highly marginal for countries with small wind penetration and high consistent wind speeds such as the UK, the reverse is true for Germany. Backup has to be provided quickly and this means gas which has undergone the mother of all price hikes in the last few years.

Interesting piece here about how a VC fund sees great opportunities in China for environmental and alternative energy technologies. . .

"The country's environmental protection watchdog estimated in September that it would cost about $136 billion, close to 7 percent of gross domestic product, just to clean up all the pollution pumped out in the country in 2004. Venture capital executives said China's aspirations to be more green pave the way for the creation of clean energy and other environmental start-ups, and investors have taken notice. Shares in China's Suntech Power Holdings Co. Ltd (STP.N: Quote, Profile, Research), a solar cell maker, have risen nearly 72 percent since raising US$396 million in a New York IPO last December."

Suntech (see our page link for prices, news and stock fundamentals http://altenergyinvestor.advfn.com/suntech.html) of course is well known to AEI followers.

A lot of people think clean coal technology - i.e. the carbon-sequestrated rather than the clean air kind - will be a major player in the near distant future. I'm not so sure. The world's first clean coal station will be built in the UK but I doubt the Chinese will follow suit unless the West is prepared to pay for it. Meanwhile, Chinese manufacturing and enterprise with its long production runs is highly likely to start creating some deflation in alternative energy technologies before too long. So there you go - China is a curious mix of the problem and the solution.