S&P Analysis Cool on Renewable Energy Industry

In the absence of government policies specifically intended to encourage sustainable options to the consumption of oil, a special report from Standard & Poor’s concludes that it will be difficult to expand significant use and availability of substitutes.

Although tax incentives in the government’s Energy Policy Act of 2005 provide a short-term boost to certain renewable energy projects, such as wind, over the next few years, according to Tina Vital, a senior equity analyst at Standard & Poor’s, they may be too small to encourage oil companies either to hike existing oil & gas production, or finance the long-term development and growth of other options. Among the renewable energy sources she examines are hydroelectric, wind and solar power as well as geothermal and biomass technologies, including ethanol. “Most of the supermajors, such as BP, Chevron, Royal Dutch Shell and Total, are building renewable energy businesses with a long-term view,” said Vital. “But with returns for renewable technologies lagging, some energy companies have written down or limited their investments in renewable technologies.” “However, with oil prices soaring,” Vital said, “investment opportunities in alternative fuel technologies, such as gas-to-liquids and coal-to-liquids, have become more attractive.” Standard & Poor’s held a telephone conference this week to discuss the impact and credit implications of high energy prices on the U.S. and overseas economies, and on specific industry sectors.


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