During March 3-7, 2008, I had the opportunity to attend the 2008 Washington International Renewable Energy Conference (WIREC), touted to be the largest international conference on renewable energy in the world. WIREC was actually three events rolled into one—a ministerial conference for policy makers, a business conference, and a tradeshow. Most everyone involved in renewable energy was there.
From the size and the diversity of the corporate landscape represented at the panels and on the tradeshow floor, it was obvious that companies in every industry want to be considered committed players in the renewable energy space.
BP, among the largest oil companies in the world, paid $1 million to be the lead sponsor of this three-day event. Other non-traditional green companies, including oil major Chevron, waste-to-energy power company Covanta Energy, and auto maker GM, were also principal sponsors.
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Traditional financial management curicula establish that a corporation’s primary objective is to maximize the value of the firm and, in turn, maximize shareholders’ return. Advocacy groups and the socially responsible investing (SRI) community have nothing against companies that strive to increase earnings — so long as profits aren’t maximized at the expense of local communities, employees, and the environment.
What’s been difficult, though, is making the link between environmental, social and governance (ESG) issues and financial performance. Over the years, dozens of studies have reported on how well corporate citizens perform from a financial standpoint.
My financial textbook, as well as some SRI skeptics, argues that companies that spend resources pursuing “extra-financial” objectives are at an inherent financial disadvantage to their competitors that instead devote those resources to seeking lower cost production, developing new products, and maximizing sales.
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While wind power has become the most economically competitive renewable energy source globally, future US growth faces a hurdle in the form of a supply chain bottleneck for turbines.
Market share for turbines has become increasingly consolidated in the hands of a few producers, putting pressure on domestic wind developers and creating an opportunity for more vertically integrated foreign utilities to acquire US assets. Throw in the fickle production tax credit for wind power with its two-year lifespan, and the US outlook for more wind power does indeed look shaky.
On the positive side, more and more states are increasing their renewable portfolio standards, the price of oil continues to rise, demand for energy is expected to grow and energy independence from foreign producers is still an attractive proposition to law makers.
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