Alternative energy is any energy source that is an alternative to the most popular energy source of the time. Today, it is generally used in the context of an alternative fuel source to fossil fuels. New alternative energies emerge in conjunction with new financiers- the light bulb was financed by JP Morgan while alternatives today like solar are being financed by people via Mosaic Inc..
The nature of what constitutes an alternative energy source has changed considerably over time, as have controversies regarding energy use. Today, because of the variety of energy choices and differing goals of their advocates, defining some energy types as â€œalternativeâ€ is highly controversial.
Generally, alternative energy is that which is produced or recovered without fossil fuel use.
Hydrogen gas is a completely clean burning fuel; its only by-product is water. It also contains a relatively high amount of energy compared with other fuels due to its chemical structure.
2H2 + O2 â†’ 2H2O + High Energy
High Energy + 2H2O â†’ 2H2 + O2
This requires a high-energy input, making commercial hydrogen very inefficient.
Floating wind farms are similar to a regular wind farm, but the difference is that they float in the middle of the ocean. Offshore wind farms can be placed in water up to 40 metres (130 ft) deep, whereas floating wind turbines can float in water up to 700 metres (2,300 ft) deep. The advantage of having a floating wind farm is to be able to harness the winds from the open ocean. Without any obstructions such as hills, trees and buildings, winds from the open ocean can reach up to speeds twice as fast as coastal areas.
As an emerging economic sector, there are limited investment opportunities in alternative energy available to the general public. The public can buy shares of alternative energy companies from various stock markets, with wildly volatile returns. The recent IPO of SolarCity demonstrates the nascent nature of this sector- within a few weeks, it already had achieved the second highest market cap within the alternative energy sector.
Investors can also choose to invest in ETFs (exchange-traded funds) that track an alternative energy index, such as the WilderHill New Energy Index. Additionally, there are a number of mutual funds, such as Calvertâ€™s Global Alternative Energy Mutual Fund  that are a bit more proactive in choosing the selected investments.
Recently, Mosaic Inc. launched an online platform allowing residents of California and New York to invest directly in solar. Investing in solar projects had previously been limited to accredited investors, such as Warren Buffett, or a small number of willing banks.
Over the last three years publicly traded alternative energy companies have been very volatile, with some 2007 returns in excess of 100%, some 2008 returns down 90% or more, and peak-to-trough returns in 2009 again over 100%. In general there are three subsegments of â€œalternativeâ€ energy investment: solar energy, wind energy and hybrid electric vehicles. Alternative energy sources which are renewable, free and have lower carbon emissions than what we have now are wind energy, solar energy, geothermal energy, and bio fuels. Each of these four segments involve very different technologies and investment concerns.
For example, photovoltaic solar energy is based on semiconductor processing and accordingly, benefits from steep cost reductions similar to those realized in the microprocessor industry (i.e., driven by larger scale, higher module efficiency, and improving processing technologies). PV solar energy is perhaps the only energy technology whose electricity generation cost could be reduced by half or more over the next 5 years. Better and more efficient manufacturing process and new technology such as advanced thin film solar cell is a good example of that helps to reduce industry cost.
The economics of solar PV electricity are highly dependent on silicon pricing and even companies whose technologies are based on other materials (e.g., First Solar) are impacted by the balance of supply and demand in the silicon market. In addition, because some companies sell completed solar cells on the open market (e.g., Q-Cells), this creates a low barrier to entry for companies that want to manufacture solar modules, which in turn can create an irrational pricing environment.
In contrast, because wind power has been harnessed for over 100 years, its underlying technology is relatively stable. Its economics are largely determined by siting (e.g., how hard the wind blows and the grid investment requirements) and the prices of steel (the largest component of a wind turbine) and select composites (used for the blades). Because current wind turbines are often in excess of 100 meters high, logistics and a global manufacturing platform are major sources of competitive advantage. These issues and others were explored in a research report by Sanford Bernstein. Some of its key conclusions are shown here