In recent years a multitude of Green business ventures have cropped up, and this marketplace has received a large amount of attention from investors and concerned citizens as the US economic downturn and volatile energy prices have begun to take their toll on businesses and individuals. The latest Cleantech Forum in Washington DC gives a good example of these ventures.
The demand and popularity of fuel-efficient gas, hybrid, and all-electric vehicles is at an all-time high. American auto makers who had been staying afloat for the past two decades by selling technologically stale trucks, SUVs, and large sedans that guzzled affordable gas have had to retool their assembly lines, scramble to get research and development operations out of their basements, and reinvent themselves as progressive companies through sleek advertising campaigns. The need for stable and renewable energy sources has prompted many new business ventures in areas including wind farms, solar plants, biofuel plants, recycling technologies, and smart grid technologies for utilities. The installation of new wind farms by large foreign and domestic energy firms took off significantly in 2007 and backlogs of wind turbine orders continue to grow. Venture capital is available from specialized green venture capital firms as well as large firms looking for future growth markets after the tech and housing bubbles have left them seeking the next big investment meal ticket.
The business models of these ventures are dependent on high energy prices. Auto makers would gladly continue to manufacture and market big cars in large numbers if gas prices went down. American oil companies would like nothing more than a steady supply of cheap barrels to keep their entrenched positions as the primary energy suppliers of the nation. While there is an increasing amount of legislation being proposed in many nations to promote and protect green business practices, the worldwide economic downturn threatens these initiatives, even as the reality of climate change starts to sink:
The Prince of Wales’s UK Corporate Leaders Group on Climate Change said “deep and rapid” cuts were needed in greenhouse gas emissions.
The group includes the bosses of Tesco, BAA, Shell and energy group E.ON.
Greenpeace accused some of those involved of “hypocrisy of a previously unknown magnitude”.
In a letter to the three major party leaders, the business leaders urged them not to allow fears of an economic slowdown to divert them from forging a cross-party consensus on policies to cut emissions.
They wrote: “We now urgently need cross-party effort to develop a comprehensive package of policy measures to change every major sector of the economy.”
the above is an excerpt from the BBC article Bosses urge climate change action.
The immediacy of an economic crisis far outweighs the prospective dangers of climate change and the finite supplies of oil and natural gas within the Earth. The immediacy of once-more affordable oil imports, even from semi-hostile governments, will likewise cause Green and not-so-green Energy Diversification businesses to struggle for funding as their business models become unprofitable. Established alternative energy businesses may not be able to turn a profit or break even, causing them to collaps, downsize, or relocate.
A Wall Street Journal article entitled New Turnaround in Oil Prices Isn’t All Good News states,
But a sustained turnaround in oil prices could also pose long-term challenges to various efforts to broaden the world’s energy supplies. Concerns over skyrocketing fuel costs have prompted U.S. consumers to cut back sharply on gasoline consumption while spurring vigorous debate in Washington over ways to boost efficiencies and promote new forms of energy. That momentum for change may ebb quickly if prices recede to more comfortable levels.
If prices fall much below $90 a barrel, that could also put a crimp on some of the more complex and costly oil projects, especially the massive work under way in the oil-sands region of Western Canada. Forecasters are counting on the oil sands, which now provide around 1.4 million barrels a day, to help meet rising demand in coming years.
OPEC would be happy if the Canadian Tar Sands oil projects were shut down or their scope downgraded as a result of affordable oil imports to America. While extracting oil for tar sands is by no means a Green or renewable energy source, it demonstrates that even alternatives to oil imports from the Middle East, Russia, and South America are endangered by a decrease in current oil prices. Startup companies involved in the Green sector are typically small in scale, but investors may be hesitant to provide funding when the prospect of a return to business-as-usual is present. These businesses may survive with moderate energy prices, but they will certainly not thrive. On the other hand, extremely high energy prices may create a renewable energy sector bubble as the valuations of these business models are directly or indirectly related to high energy prices. It is likely that the geopolitical volatility of the past decade, the depletion of gas and oil resources, and the inevitability of climate change will make it apparent to investors and voters that the funding and protection of a sustainable future is in everybody’s best interests.
Price Per Barrel in 2008 USD
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