Tuesday, January 30, 2007

Powershares Cleantech Portfolio: Capitalize on the Clean Energy Trend

Since President Bush’s State of the Union Address, the headlines have been numerous and divided on the viability of “Energy Independence”. Most focus on denouncing ethanol as being impracticable, citing studies that ethanol produces 70% of the energy of an equal volume of gas or it takes as much energy to produce as it gives off.

Then there is the food-versus-fuel debate. They pronounce that we are forsaking our nation’s food supply for ethyl alcohol, like a moonshiner with needy children. Even Tyson Foods (TSN) warns that increased ethanol production will create higher global food prices with the consumer withstanding the worst of increased prices. The food vs. fuel debate has been further exacerbated by Lester Brown of the Earth Policy Institution claiming the world will be disabled with higher grain prices. Rick Tolman, CEO of the National Corn Growers Association, quickly countered stating, “All demands for corn-food, feed, fuel and exports are being met”.

Hog wash. 1. President Bush has never used the term “Energy Independence”. He has never stated that ethanol was the panacea. He has set forth policy and initiatives to ease our dependence on foreign oil with a portfolio of energy including, nuclear, biomass, clean coal, ethanol, domestic oil and other renewable solutions. 2. The market will dictate the state of ethanol. There is no current production mandate and our food supply is not being held hostage.

For us to move forward, apart from all this frivolity, three things must emerge:

1. Government Mandates such as Senate Bill 309, amending the Clean Air Act. A reduction in carbon emissions will spur technology towards improving energy efficiency and performance. According to the London Times 34 of (FTSE 100), companies have achieved cost savings directly as a result of setting quantifiable targets to reduce carbon emissions.

2. Government Incentives to seed technological advances in energy production and utilization. 6-7 Billion has been set aside for new nuclear plants but that is down the road. The government needs to follow the venture capital money now.

3. Independent Oversight to insure that special interests and earmarks are held at bay.

A good way to take advantage of this burgeoning trend is Powershares Cleantech Portfolio (PZD). This ETF holds a basket of companies that among other things, improves the efficiency of energy consumption, such as Ballard Power (BLDP) with fuel cells, Evergreen Energy (EEE) clean coal solutions, Syntroleum Corp (SYNM) natural gas to liquid fuel and Itron (ITRI) software solutions for the optimized metering of energy.

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