Alternative Energy
SECTOR REVIEW
Will It Be Back in 2009?
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The Credit Suisse Global Energy Team has published its annual
outlook report, entitled ‘Energy in 2009: Reboot!’ The 270-page report
includes sections on alternative energy.
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This report compiles the various articles related to alternative energy,
including:
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(1) An opinion piece on the outlook for alternative energy globally,
concluding spending is expected to decline versus 2008 due to difficult credit
markets and economic pressures;
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(2) A report on the expected Renewable Portfolio Standard in the US,
concluding that power prices will likely fall as a result of the renewable power
capacity additions;
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(3) A report on the levelized cost of electricity, where we model different
forms of electric generation on a comparable basis. We conclude solar is far
from grid parity today, but that regardless of economics, demand for solar
will continue to grow;
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(4) Outlooks for the wind and solar industries, concluding a probable
oversupply in 2009, resulting in reduced margins at manufacturers of panels
and turbines;
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(5) A report on the prospects for hybrid electric vehicles, a potential answer
to US problems (energy dependence, global warming, among others);
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(6) An outlook for biofuels, including advanced biofuels such as cellulosic
ethanol and biobutanol.
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We also include a summary of our main views on conventional oil and
natural gas for 2009.

Alternative Energy in 2009
Alternative energy stocks significantly underperformed the broader market in 2008,
dropping 65% versus 40%. The decline in 2008 reflects a combination of:
■ Very high valuations and expectations entering 2008;
■ The credit crisis impacting new spending, particularly in Europe;
■ The collapse of oil and natural gas pricing;
■ Production catching up with demand in both solar and wind.

Outlook for 2009
We think 2009 will be a challenging year for alternative energy stocks. Global expenditures
in alternative energy should decline given difficult credit markets and economic pressures.
While the year will see restrained growth in most sectors, we see the following identifiable
themes in 2009:
■ The U.S. should see increased investment as President-elect Obama focuses on
green initiatives, with an increased focus on energy efficiency themes and the likely
implementation of a 10% national RPS early in 2009.
■ The solar industry’s oversupply predicament will likely continue through 2010. Costs
should continue to fall, helping drive solar toward grid parity.
■ Wind capacity additions are going to tail off significantly, with demand decreasing 30%
in 2010, negatively impacting turbine manufacturers’ margins by ~500 bps.
■ Hybrid electric vehicles should see continued support in the U.S., especially if Obama
follows through with his promise to put 1 million hybrids on the road by 2015. While the
technology is not yet ready for mainstream adoption owing to battery technology
issues and costs, we believe the next 5 years look very promising for hybrids.
■ Cellulosic ethanol is a promising biofuel that should receive additional support. While
biobutanol is a better fuel, we believe cellulosic ethanol is likely going to win owing to
the existing infrastructure already built and the earlier tax advantages. Cellulosic
ethanol is still far away from commercial-scale production, but progress is being made.