Davydova says she is bullish long-term about the alternative energy sector, which she says is reaching an “economic tipping point” where solar, wind and biofuels become truly competitive with traditional energy.”
She bases her optimism on three factors:
One is a string of recent disasters, such as the BP well blowout in the Gulf of Mexico, and the earthquake and tsunami-induced meltdowns of the nuclear plants at Fukushima, which she said have raised questions about “reliance on traditional energy sources, including fossil fuels like oil and nuclear energy.”
Another is the huge and growing demand for energy in emerging markets, with their massive populations.
The third driver she sees is rapidly developing technologies and “more compelling energy solutions,” which she said will provide “particularly compelling investment opportunities.”
Davydova said rising oil prices have provided “a positive as a backdrop” for alternative energy, with the most immediate beneficiary being biofuels, though solar and wind have also benefitted, at least indirectly.
She said wind power is becoming "truly competitive" in a high natural gas price environment (such as 2007-08) or in countries where natural gas prices are high and that solar is "three to five years away," while biofuels are "closing the gap" to become competitive with oil.
Asked about a trend, particularly in the cash-strapped U.S., of declining federal and state government subsidies for alternative fuels, especially solar and wind, she said, “The renewable energy industry is transitioning from subsidy dependent markets towards large-scale, cost-competitive” adoption.
She added that ending subsidies is not necessarily bad for alternative energy, noting that in Germany, where such subsidies for solar power have been getting reduced every year for some time, “solar installations have increased six-fold over the past three years.”
Meanwhile, she said, “Overall, declining global policy support has contributed to lower wind turbine and solar module prices,” with wind turbines down 15-20% in cost, and solar modules down in price by 60%.
Biofuels, meanwhile, which are also seeing subsidies cut, have been growing at a 30% compound annual rate over the past four years.
In the near term, Davydova sees the best opportunity for investors in the biofuels market, while longer term, she says, she sees “attractive long-term investment opportunities” for solar and wind, “particularly among the lowest cost manufacturers.”