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Bill Gates Was Right: Green Energy Wasn’t Ready for Prime Time

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MIcrosoft chairman Bill Gates. (Elaine Thompson, AP)
Elaine Thompson, AP

It’s been nearly two years since Bill Gates came out with his famous dismissal of “green energy” in general, and solar power in particular, as “cute” but too inefficient, too expensive, and too small in scale to actually make a dent in global warming. And once again, it appears the founder and chairman of Microsoft (MSFT) was ahead of the curve.

In an article in this month’s edition of The Wall Street Journal’s WSJ.Money magazine, the newspaper outlined a swelling backlash against solar, wind, and biofuels — among investors at least: “Burdened by global overcapacity, slowing demand and the resurgence of fossil fuel production, clean-tech investments have fallen heavily out of favor” on Wall Street, lamented the Journal.

Wind and Sun and Batteries, Oh Well!

And no wonder. While energy experts predict that wind power contributions to global energy production will continue rising, and may account for more than 30 percent of global energy production by the year 2050, the pace of growth in other green energy sectors is already showing some slack.

Take solar power systems installations, for example. After growing nearly six-fold from 2007 to 2012, growth in the solar power market is expected to slow in the coming years, and to barely double in size from 2011 through 2016.

Other green-energy niches are encountering headwinds as well. While electric cars saw sales spike 26 percent last year as Tesla (TSLA) and Nissan, and even Ford (F) and General Motors (GM) brought e-cars to market, sales are expected to grow only 6 percent this year. After rapidly burning through their supply of early adopters — and as the vehicles’ limited driving range and high sticker prices, plus the lack of charging infrastructure along major transportation routes becomes more clear — automakers are hitting a wall as they seek further growth.

The Fallout

Meanwhile, a surge in investment in shale gas and oil is helping ignite a boom among traditional energy companies, expanding supply, driving down prices, and making green energy look all the more expensive in comparison.

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Result: One pioneer of green energy investing, Sun Microsystems co-founder and green energy investor Vinod Khosla, has seen the value of his green-energy investments fall by half.

And that’s the good news.

The bad news is that many ventures in the industry have done much, much worse. Solar panel maker Solyndra was only the highest profile of these failures. More recently, we’ve also seen bankruptcy filings of battery makers A123 Systems and EnerDel parent Ener1. The death of automotive start-up Th!nk Global. The slow fade of Pacific Ethanol and its peers.

What Does It Mean to You?

The good news among all this doom and gloom, of course, is that as the hot air rushes out of the overinflated green energy balloon, what remains should be a more solid core. Once the unprofitable dross have been cleared away, any profitable companies that remain should be easier to spot — and considerably cheaper, should you still feel inclined to invest in them.

Meanwhile, the future for investments in oil and gas companies like ExxonMobil (XOM) is looking shinier than ever.

Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends Ford, General Motors, and Tesla Motors. The Motley Fool owns shares of Ford, Microsoft, and Tesla Motors. Try any of our newsletter services free for 30 days.

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