Cleaner Energy In China Brings Investment Opportunity

One of the big topics at the World Future 2014 Conference in Orlando, Florida, was alternative energy.

The usual energy sources made the list: solar, wind, wave, hydro…even thorium reactors got a mention.

Then there’s the alternative energy source that gets a grudging nod of acceptance from the green types — natural gas.

Yep, natural gas is a fossil fuel. But it’s also the cleanest of the fossil fuels. And arguably it’s the most efficient and reliable of the alternative fuels. That puts it in something of a sweet spot when it comes to finding new ways to generate power.

Not surprisingly, when it comes to initiatives in alternative energy, China is at the forefront of trying to exploit this sector…

Whatever you may think of China’s communist and centrally planned regime, it’s hard to argue that when the government sets its mind on something it tends to achieve it.

And now — as centrally planned governments tend to do — China has set a target for alternative energy vehicles. As Bloomberg reports:

‘China is mandating that at least 30 percent of new government vehicles be powered by alternative energy by 2016 in the government’s latest salvo to combat pollution and reduce energy dependence.

‘At least 15 percent of new vehicles will use new energy this year in areas such as Beijing and the Pearl River Delta in Guangdong province, the government said in a statement posted on the website of the National Government Offices Administration department yesterday. New energy is a term used for electric cars, plug-in hybrids and fuel-cell vehicles.’

After being sceptical about the electric car industry for a long time, we’ll admit to changing our stripes. It wasn’t because we’ve gone all ‘hippy’. Or that someone moved us with their emotional argument for clean energy.

And it wasn’t because someone convinced us of the scientific argument either. Oh no. It was a much more shallow reason than that.

Green energy can be good-looking

We really got on board the electric car story when we saw a Tesla Motors [NASDAQ:TSLA] all-electric car for the first time in April during a family holiday to California.

To say it’s a good-looking car is an understatement.

The Tesla Model S isn’t your typical ugly or dull looking electric car. It’s certainly not a boring Toyota Prius or a squat-looking Nissan Leaf.

The Model S is a car that’s hard to tell apart from a stylish sports or luxury car brand.

So yep, the one thing that got us on side with electric cars had nothing to do with saving the environment or ‘thinking about the kiddies’…it was purely cosmetic. The Model S looks good.

But heck, the important thing is the result isn’t it? It’s not how you get there. Perhaps now, carmakers will realise that going green doesn’t mean ‘going dull’.

However, there’s one problem with the electric car industry. It’s not quite as green as many think.

Ken knows about China’s pollution problem

The problem is that as long as fossil fuels power the electricity power stations, then even a ‘green’ electric car isn’t really green at all.

In fact, if it’s a coal-fired power plant you could say that the ‘green’ electric car is a bigger polluter than a petrol-powered car. It’s just that rather than the pollution coming out of the cars’ exhaust pipe, it coming out of the smoke stack at the power station.

This brings us back to China. The idea that China may mandate alternative energy for 30% of new government cars is nice. But it won’t be the initiative to help China’s chronic pollution problem.

Emerging markets analyst Ken Wangdong is only too aware of the pollution problem. Ken grew up in China and has working for big investment and consulting firms in China and Hong Kong.

He’s seen the pollution first hand. He knows the health impact of car and industrial pollution. It will take a big effort to get rid of the deadly smog in China’s cities…a bigger effort than running less than a third of China’s government cars on alternative fuels.

That’s why we see China as a ‘new frontier’ in alternative energy. Not only is China on an inevitable path to become the world’s biggest economy, but it has the resources to become the world’s biggest ‘green’ economy too.

Read the rest of this article at Money Morning