To get meaningful sources of alternative energy over the huge initial development costs we need a green bubble. The government has been attempting to incent development and deployment of alternative energy, but the only thing that will really make it happen is an investment bubble driven by what Alan Greenspan labeled “irrational exuberance” (or from Gordon Gecko’s perspective good old-fashioned greed).
Throughout history bubbles have produced great things that likely would never have been accomplished without a hugely disproportionate flood of money and resources into a high risk field in pursuit of dramatic returns. When the bubbles burst most of the players fold and the valuation of the survivors take a beating, but what is left after the dust settles often changes the world for the better. The development of California through the Gold Rush, the railroad system, and most of the great things we use the Internet for came out of bubbles. It’s still too fresh not to be painful, but the housing/credit bubble led to a huge build out of homes, and as economist Mark Schniepp quipped early this year to an audience of business leaders struggling with the high cost of housing for their employees: “You wanted affordable housing… well, you got it.”
The pain of near $5/gallon gas seems to be forgotten but it is looking like it was only put on hold for the Great Recession and is on its way back to that level. As the overall economy stabilizes and fear ceases to be the main driver of investment decisions, the conditions are ripe for the money that has been sitting on the sidelines to come rushing in to answer a looming worldwide energy problem and make a profit on the way. But wait, there’s Facebook (estimated to trade privately at over 200 times earnings and 25 times revenue by The Motley Fool), Groupon (estimated value over 12 times revenue), and Salesforce.com (value over 10 times revenue) along with this whole “new” cloud thing.The early signs are that we are entering Tech Bubble Part 2 as investment is piling into social media and companies marketing with the cloud term now instead of the Application Service Provider “ASP” term that rose and fell at the end of the last tech bubble.
This means we may have to wait a few years for Tech 2 to burst before we can get to the green bubble as companies like First Solar, one of the worlds largest solar panel manufacturers, are valued at 4 times revenue. In the mean timethe catalyst for alternative energy development may be the painful sucking sound of $5/gallon gas headed out of the U.S. economy.