You may not like higher oil prices and increasing electricity demand when it hits your gas and electric bills, but the outlook for clean technology companies gets a little brighter.
In a research note, JMP Securities analyst Alex Gauna said two trends are converging that would bode well for clean tech. The two trends include:
Higher oil prices. Oil prices were up 68 percent year over year through March 31. Gauna writes:
Higher oil prices should encourage switching to higher-performing vehicles (hybrid and electric) and support stronger lithium ion battery adoption in vehicles. Higher electricity prices directly incent conversion to Green alternatives, including solar, LED lighting, and demand response technologies.
Excess capacity at utilities are shrinking. With capacity falling, electricity prices are likely to rise and that leads to more interest in alternatives. Gauna writes:
As the global economic recovery extends itself utility reserve margins are falling and represent a gathering trend that we think will support further renewable integration in the months and years to come. There is an apparent reversal in the trend in reserve margins of utilities within large Independent System Operators (ISOs) and Regional Transmission Operators (RTOs). Through the course of late 2008 and throughout 2009, we believe reserve margins were increasing among many utilities throughout the United States due to an overall decline in electricity demand. Our channel checks suggest to us that electricity demand may have troughed toward the latter half of last year. With rebound anticipated for electricity demand, we could begin to see an increase in electricity prices that would support higher-cost renewable integration and generation, such as solar; as well as, increase electricity costs at peak demand times, supporting further growth and adoption of demand response and energy efficiency technologies.
Gauna reckons that companies like SunPower, Li-ion battery companies A123 Systems and Ener1; LED lighting outfit Cree and EnerNOC, which makes demand response systems, would benefit from higher oil and electricity prices.