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TWST: What has been Rockefeller & Co.'s focus with respect to the
renewables industry?
Ms. Partlow: Our office began many years ago with John D. Rockefeller
and has expanded greatly over the years. We now manage assets of about
4 billion, only half of which are Rockefeller family assets, and
provide financial advice to high net worth individuals and foundations.
We manage a wide array of asset classes, everything from global large
cap to small cap and socially responsive assets, which we've been
focusing on since the 1970s. In the socially responsive area, we are
looking for companies that have solutions to major social/environmental
problems. That has led us to look at all the different renewable
technologies, starting with geothermal and going back 20 or more years.
We became involved with Magma Power, which had geothermal fields in
California that were very successful. We've watched the solar industry
develop and we've watched the wind industry develop, but hadn't invested
directly in the solar industry until the last few years. Now we feel a
lot of things are changing for this industry. We certainly had an energy
crisis in the 1970s and 1980s that drove petroleum prices up to
extremely high levels and created a platform for some of the renewables
because of tax incentives and government programs. But those programs
were short lived. As soon as oil prices plummeted, the crisis ended and
tax credits went away. The question today is whether or not there is a
solid basis for optimism about clean energy sources. We think the answer
is yes. We are more encouraged about the situation now than we have been
for many years. A relatively high and stable level for petroleum prices
provides a much steadier base for the alternatives to compete against.
One reason for the likelihood of relatively high petroleum prices is
that demand generally is rising faster than supply due to population
growth and transportation use, which is the largest part of oil usage.
And that's growing rapidly worldwide. On the production side, worldwide
production is beginning to decline even though we have many new finds in
the Caspian Sea and in Africa; US production is declining even more
sharply. So the US definitely has more impetus for alternatives now than
at any time in the past, especially in transportation. We also have
security issues now, which are not likely to go away very soon, and this
need to reduce our dependence on imports is a definite driver for the
renewables industry. Other factors that are pointing to a better outlook
for renewables are caused by supply constraints in our electric power
markets combined with increased demand. While there is no question we
could correct these supply problems over time, we have neglected the
capacity additions for the past 20 years and we've allowed our
transmission grid to deteriorate, especially in the Northeast and
California. So we are likely to have a situation in which the supply is
constrained in highly populated areas in the near term. Also, because
of environmental issues, siting conventional plants is very difficult,
while distributed generation sources ' which are generally clean power '
can be sited anywhere. We certainly have need for more reliable power.
We all have digital devices today, and many critical applications ' such
as the data centers, hospitals, etc. ' require reliable power. Most
factories today have digitally controlled tools and machinery, which
require highly reliable power that the grid is not capable of
delivering. On top of all that you have the dislocations of
deregulation, which are creating temporary supply problems. That all
points to greater demand for renewables and perhaps a somewhat more
long-lasting platform, allowing the alternatives to have time to
develop. At the same time, the technology of renewables is improving
greatly. Solar has been about five years away from commercial
possibility for as long as I can remember, but today the five years is
closer than ever. In fact, there is a substantial solar industry that's
about 3 billion now annually worldwide. It is developing rapidly,
though still a small part of the power business. We've watched the whole
field develop from the early debates of 30 years ago over amorphous
silicon, which was viewed as a maverick technology far outside of
mainstream science, when everyone was focused on crystalline silicon.
Although most of the solar cells that are produced today are
crystalline, most of the research by the majors is focused on amorphous
technology. The jury is still out on which technology will prove the
cheapest, but it is interesting to see how that industry has evolved
over the years. Actually, some of the most promising new technologies
are the strategies promoted by the pure plays ' AstroPower (APWR) and
Evergreen Solar (ESLR) ' that are crystalline, but they also include
some of the characteristics that make thin film attractive. Wind power
has had a lot of improvements in technology and is much more efficient
now. It has also been growing into an established segment of the power
production market. Fuel cells are a newer field, perhaps not strictly
renewable, but they are included in that group because they run on
hydrogen, which is prevalent and very clean once you have extracted it.
Others, such as biomass, which is a big part of the renewables world, do
not have much new proprietary technology and are not as interesting for
the financial investor. So the way we've elected to participate in this
alternate energy market is to try to be pragmatic about it. We have
mixed some public and some private investments in order to capture the
current opportunities and some of the longer-term trends and the bigger
successes that we think will be realized in the future. We've favored
some transitional fuels such as natural gas, which is far cleaner
burning than petroleum and has gained significant market share over the
last few years. We have had a theory about the increased use of natural
gas for many years because of these environmental issues and also
because it's a domestic source. Both of those themes have been borne out
and we are happy to have domestic gas exploration and production in our
portfolio. But we've also kept some exposure to the industries that we
think have the largest upside potential, which are solar photovoltaics
and fuel cells. Those are the major elements of our stock market
approach, although we do have an interest in peripheral technologies
that contribute to the use of alternatives, such as hydrogen extraction
technologies and power conversion devices, as well as technologies that
improve the environmental characteristics of some of the more
traditional power sources such as gas turbines.
Tickers included in this excerpt: APWR, BLDP, CESI, ESLR, FCEL, KYO, SHCAY
For more information call (212) 952 7400. The
Wall Street Transcript does not endorse any of the comments made by interviewees, and does
not make stock recommendations.
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