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[quote=Anonymous]I have been thinking about alternative energy investment recently.  I have two questions:

1.  What is the proper role of government in alternative energy investment?
2.  Regarding alternative energy technology, is it important to be a leader or is it sufficient to be a follower or a consumer?

[b]Proper Role of Government[/b]

Obviously Solyndra put the focus on this.  But I had some recent discussions with someone in the power generation side, and he said that alternative energy is a tough business right now because energy prices are going down.  Obviously gas/oil is what it is, but electricity generation is another business entirely, and costs are going down.  This is a familiar problem with generation.  The volatility in prices are so high that you can start building wind farms and by the time you complete them, prices drop and you can't get contracts to buy the power at a breakeven price.  It's even worse with nuclear.  Nuclear power plants still take so long to complete that it's hard to contemplate getting into them to begin with.  For reference, the last generation of plants took a decade to build.  The new ones should take 4-5 years and that's not bureaucratic red tape.  Remember T Boone Pickens' plan to do natural gas + wind?  Now it's just natural gas, and he got stuck with about 700 wind turbines.

So the question is, how do we get generation capacity that is diversified when the ups and downs of energy make capital-intensive investment so risky?  Should the government be involved in this?  If not, how will the private sector do it?  Anyone who makes a big commitment is really making a bet that energy prices will be high for 7-10 years after the capacity comes online.

[b]Producer or Consumer of Technology[/b]

How important is it for us to be the leading producer of alternative energy technology?  The Chinese seem to be winning in solar panel costs, but do we care?  Is it not good enough to be able to buy the panels like we do our chips?  On top of that, I'm not sure whether solar panel production really has that much secret sauce if we wanted to enter it later.  Do we care that much whose turbines or nuclear plant designs we use?  Is the technology side of this business a big enough industry that we have to be in it?  I suppose you could use the airline industry as an analogy and say that yes, Boeing's commercial jet business probably employes 80,000 people but then again the airline industry employs 500,000.  Maybe the same is true of energy.  We could buy scandinavian turbines, chinese solar panels, and nuclear plant designs that come from Hitachi and Toshiba as often as from GE.

Despite my interest in job creation programs, my gut reaction is that the government should stay out of technology development, which is risky and better managed by the private sector, and instead create incentives for the construction of alternative energy generation facilities (ie nuclear plants, wind farms, solar farms, etc.), because the up and down cycles make it difficult for companies to take the risk.

What are your thoughts?
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