Seeking Alpha made an interesting, if not unexpected announcement on Tuesday with the publication of an article entitled “Will Natural Gas Crush Alternative Energy in 2013?”.
The author, Jeff Siegel, makes one simple point: alternative energy is currently too deep in development to compete with the cheap prices of natural gas.
Cheap natural gas prices result, for the most part, from the United State’s large store. According to the Department of Energy, U.S. stockpiles of natural gas are at record highs. As of October 5, supplies amounted to 3.725 trillion cubic feet, and by the end of the month may reach 3.903 trillion.
Furthermore, domestic oil production is predicted to remain strong as well, with drilling in North Dakota. Enhanced oil recovery technology utilized by such companies as BP (NYSE:BP), Chevron (NYSE:CVX), and Halliburton (NYSE:HAL), allow 30 to 60 percent more oil to be extracted from reservoirs, according to the Department of Energy.
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In Siegel’s opinion, solar energy, wind energy, and electric cars face too many obstacles to be considered a viable alternative to gas next year.
While the solar energy industry is not a small one, the Wall Street Journal predicted that the U.S. market for panels would likely double in 2012, it suffers from several problems. Siegel predicts that U.S. solar companies, primarily panel and cell manufacturers, will continue to face poor margins due to China’s policy of financing its solar industry. Because government money will most likely continue to support the industry in China, solar prices will continue to fall. U.S. solar companies, according to the New York Times, have told “Congress that “they cannot be truly competitive and keep creating jobs without a few more years of government support.”
However, it must be noted that the U.S. Commerce Department has decided to impose tariffs of 24 percent to 36 percent on solar panels imported from China.
Wind energy is in a more difficult position than solar. The industry, Siegel said, will stall in 2013 because of the absence of wind energy production tax credits offered by the government. Other than Siemens (NYSE:SI) and General Electric (NYSE:GE), which is the one of the largest wind turbine manufacturer in the world, “most shops will be mothballed until a new mechanism is introduced to jumpstart the industry again – or subsidies for oil, gas, and nuclear are phased out.”
The electric car industry is fraught with hurdles to overcome as well, according to Siegel. Manufacturers will not be able to provide prices low enough to garner consumer interest. While every major carmaker will have an electric or plug-in hybrid electric vehicles in production or on the road next year, battery technology will limit sales as well.
Even though Siegel said he does not believe 2013 will be the year for alternative energy, he notes that solar energy and electric cars will capture a larger share of the market in the near future. In particular, he notes that car manufacturers will “will steadily add electric vehicles” to their fleets and while sales will not be strong, “it’ll definitely help automakers move inventory and gain visibility in the marketplace.”