The Next Tech Boom

Fossil fuels provide over 85% of the fuel used on the planet. The triple dilemmas of limited supply, controlled by unfriendly nations, and the unwanted side effects of global warming have created the perfect environment for new sources of renewable, alternative energy to take hold. If you combine oil costs at nearly $150 per barrel, gas prices over $4 per gallon, war in Iraq and possibly Iran, and global warming, we might just be seeing the perfect storm to launch the next big tech boom. Today, more money than ever is being spent on alternative energy sources as plans for the end of the fossil fuel economy are being laid. Much of the information from this article is derived from a Special Report on the Future of Energy in The Economist and sections of Value Investing by Hal and Jack Brill.

The 1990’s tech boom was lead by companies like Dell, Microsoft, Cisco, and Intel. These old “tech” companies, however have done little in the last ten years to solve the world’s primary problems. The late Richard E. Smiley, PhD compiled a list of Humanities Top Ten Problems. The first five on the list are energy, water, food, environment and poverty in that order. The New Tech companies will be industrial manufacturers that invent solutions to these world problems.

New Tech includes companies that create new sources of energy, use energy more efficiently or clean up existing sources of energy. For example, Wind Power is now the fastest growing energy source on earth. Growing at 30% per year, this renewable energy source will reach 100 gigawatts this year. In May, T. Boone Pickens, one of Texas’s most famous oil tycoons, announced a $2 billion venture with GE to build the countries largest wind farm. Today, wind represents only 1% of America’s electricity, but this figure is expected to reach 15% within the next 10 years. The cost of energy created by these turbines has come down to just 8 cents per KWH (kilowatt hour) compared to 5 cents per KWH for coal power. However, according to a study by MIT, the cost of coal power would rise to 8 cents per KWH, if coal power companies were required to capture and store their CO2 emissions underground or if a carbon tax was imposed.

Wind power is considered only an interim step in moving to a world of renewable energy sources. Solar Energy is the ultimate goal. However the costs of solar energy are still high compared to other forms of energy. According to Cambridge Energy Resource Associates, photovoltaic electricity cost 50 cents in 1995. This cost came down to 20 cents in 2005. Other sources of renewable energy such as biofuels, geothermal, and hydroelectric are dropping in cost per KWH. At some point soon, one or more of these alternative energy resources will drop below the cost of oil and change the entire energy landscape as we know it.

New Tech also includes Clean Technologies. These are companies that produce products or services that improve operation, performance, productivity or efficiency, while reducing costs, inputs, energy, consumption, waste or pollution. For example, the new tech boom will include companies in the water industry. These companies focus on water treatment, water recycling and the technology and services that are directly related to water consumption. New Tech includes companies that solve the world’s food needs with innovative new healthy products. Finally, New Tech will include companies that provide infrastructure to the developing world.

We will not find the solutions to the world’s major problems by looking at 1990’s style tech companies. They are busy producing products like Grand Theft Auto IV. The solutions to today’s problems of sky rocketing energy prices, a lack of clean water in many areas of the planet, solving basic food shortages, cleaning up our environment, and providing infrastructure for undeveloped nations may just be solved by innovative companies in the U.S. industrial manufacturing sector.