Desertec: Investors Can’t Afford to Be Too Green if They Want to Make Green

Too many green investors – and the U.S.-based fund managers thatcater to them – are about to miss out on green energy’s long termtrillion-dollar payoff because they insist on investing in companiesthat generate 50% or more of revenue directly from sales of greenproducts like wind turbines and solar panels.

Nobody would mistake German engineering giant Siemens AG (Symbol SI), Swiss engineering behemoth ABB Ltd. (Symbol ABB), or Deutsche Bank AG(Symbol DB) as green energy companies. Indeed, Siemens and ABB aredetested by many environmentalists because they construct fossil-fueland nuclear power plants.

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But these and other non-green corporations also are at the heart ofmassive new green energy projects like Desertec, which calls fortapping the North African desert’s sweltering sun to produce enoughcarbon-free solar electric power to satisfy 15% of Europe’s electricaldemand in 2050.

Desertec is a consortium of a dozen or so European companies,several of which trade in the U.S. Last week the group signed amemorandum of understanding “to analyze and develop the technical,economic, political, social and ecological framework for carbon-freepower generation in the deserts of North Africa.” There are similarDesertec plans being developed in other desert areas of the world,including the U.S. Southwest.

Despite its pie-in-the-sky sounding goal of transforming part of theSahara into a solar power oasis, generating electricity that will gettransmitted under the Mediterranean in high-voltage, direct-currentcables, Desertec shapes up as one of the most potentially lucrativelong-term energy plays in the world.

Indeed, Desertec isn’t just an estimated half-trillion-dollar energyplay. It’s also a water and agriculture play, as well as an emergingmarkets play. Consider: there should be enough solar power that doesn’tgo to Europe to run gigantic desalination plants that transform partsof the Sahara into fertile food-producing regions. Desertec thus couldrevolutionize the African continent and create powerful new emergingeconomies.

Other companies likely to benefit from Desertec are, for the mostpart, no greener than Siemens and ABB. They include the German utility E.ON AG (Symbol EONGY) and German diversified energy firm RWE AG (Symbol RWEOY). They join greener potential beneficiaries including the Abengoa Solar unit of Abengoa SA (Symbol ABGOY).

Moral of the story: To make green, an investor can’t be too green with his green investments.

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