The American Spectator

THE NEW ENERGY SECTOR IS NOT short of private funding; its “cocktail party” popularity and the pressure of the Kyoto climate change agreement has produced an ever increasing devotion of resources to research, and a huge boom in speculative investment in the last couple of years. Private equity investments alone in the New Energy sector (excluding investments by existing corporations or government or fund-raising by publicly listed companies) totaled more than $1.6 billion in over 150 transactions in 2005, double the level of the previous year.

As always with such explosive growth, much of the development in the sector is ill thought through. Indeed the popularity of the sector appears to be producing yet another bubble, and has undoubtedly attracted many sharp operators and indeed outright crooks. A boom/bust cycle appears to be inevitable, which is a pity because it could set back genuine progress in the field for a decade.

Price signals from the market and the “cocktail party” credibility of New Energy will produce oil-replacing developments at a rapid pace provided government does not impede the progress. More important than “New Energy” itself, existing technology, both to extract oil reserves from Canada and Alaska and to produce ethanol economically from sugar cane, offers most if not all the additional energy sources we need to avoid over-dependence on the unstable Middle East.

Only politics can cause a crisis, but as usual, politics appears to be driving government firmly in the direction of obstruction, waste, and economic illiteracy.