Merrill Lynch Goes Ga Ga for Green
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Note to investors: Don't get too comfortable with the falling price of oil.
Merrill Lynch's clean tech strategist Steven Milunovich said in a report this week that energy concerns aren't about to disappear. But as a result, he said he sees long-term investment opportunity in environmentally friendly, or "clean," technologies, such as solar and wind power.
Noting technology revolutions occur about every 50 years, the Merrill report forecasts the current IT-centric age should give way to clean tech as the dominant technology, as the energy infrastructure moves to renewables. While acknowledging there are funding challenges in the current economy, Merrill predicts an acceleration in clean tech activity in 2010-11 after the funding issues are addressed.
Milunovich is particularly bullish on the prospects for solar as a long-term technology frontrunner. "Solar enjoys the fastest price-performance improvements," he wrote. "Wind is also promising, with biofuels and geothermal dark horses."
While there are plenty of save-the earth stories promoting green and renewable technologies, Merrill thinks economics will ultimately be the driver for alternative energy.
"These problems can't be solved without a heavy dose of capitalism," the report said. "Googles will be created and investors will benefit. It may take longer and require more capital than did the Internet, but clean tech should be the next big thing."
Energy in a pre-Internet stage
It will likely be a while until clean tech hits its full stride, however. Tech veteran and venture capitalist Ray Lane of Kleiner Perkins is quoted in the report as saying he thinks energy is in the same stage that technology was in the pre-Web, late 1980s.
"Corporations weren't looking to venture capitalists to see what is going on, they were looking to IBM, Sun and Oracle," he said in the report. "It was only during the 1990s that enterprise customers became more concerned with venture capital investments. The same is happening now in energy."
Likewise, Milunovich said clean tech is at the beginning of a high-growth period, much like computing was in the early 1970s. "The application of technology to resource problems should cause profound changes in the energy, utility, and automotive industries," he wrote.
The 36-page report also notes that tech companies such as Google (NASDAQ: GOOG) have been investing in and investigating alternative energy solutions.
"Of course, [Google] is not an uninterested observer, having recently partnered with GE on smart grid, invested over $20 million in solar, and $10 million in geothermal," Milunovich wrote.