Clean energy has been one of this president's favorite topics.
Mr. Obama calls his strategy "All of the Above" and has vowed to
continue to fund energy research and development even if it fails.
This is a bold statement considering the heat he took for losing
more than $500 million in a failed energy startup called Solyndra.
But the president is undeterred and says he's committed to energy
innovation, and is willing to fund it.
Mr. Obama made these points recently in a speech at the University
of Miami in Florida. His "commitment" was what made headlines, but
it wasn't all the White House had to say on the matter.
The president also announced a $14 million grant funded through the
research arm of the Energy Department to support the development of
biofuels from algae and thus diversify the nation's energy
Here's the thing: The technology is already proven.
At least one company is past the R&D phase and is already
selling fuel derived from algae. Another,
, has allocated $600 million to seek its own algae breakthroughs.
Crude oil is basically plant matter that died long ago, became
trapped in rock and over time developed into petroleum. Algae can
be genetically programmed to mimic this process. Special types of
algae being grown today can be harvested, dropped into an oil
refinery and turned into fuel and other products.
How? A neat trick.
Scientists know plants devote lots of energy into making food
through photosynthesis. But if the plant doesn't have to do that,
then it puts all of its energy into growing. So biofuel algae are
grown in the dark with plenty of food. The algae grow at a
remarkable speed, ready for the refiner in days instead of eons. No
need to wait, no need to drill. It's the same as crude oil, but
renewable, unlimited and "green."
The political reality is the president needs a clear win in clean
He's allocating a small sum to an algae study because he knows the
technology works. He wants to say it works and note that he funded
the research into it. He knows he can't take credit for Exxon's
investment, nor for the hundreds of millions investors have poured
into other algae-fuel companies.
The leading algae company is
I've written about the company's promise in my
newsletter since before its
even went on the
. (And, not to put to fine a point on it, but I've also long said
the president would use ARPA-E findings on the campaign trail.)
Why do I say the president already knows algae works?
Because Solazyme is already selling fuel to the U.S. Navy -- also
United Airlines (NYSE:
The company also sells other products made from the various oils it
derives from algae. Its biggest customer for these oils is the
giant European personal goods company
. It uses these oils to market a popular algae-based skin care line
sold at Sephora, one of the nation's leading cosmetics retailers.
It even has a foods division that makes flour from algae.
Now, can algae deliver the fuel of the future? That's the wrong
It's the wrong question because we already know the answer -- yes,
it can -- and Mr. Obama knows it. So do investors who are buying
shares of Solazyme and the analysts who are slapping "outperform"
ratings on the stock.
Risks to Consider:
I typically recommend most investors reserve 20% of their
portfolio for stocks like Solazyme. You have to be willing to
tolerate some volatility -- but the rewards can be tremendous.
Action to Take -->
Do your own algae study. Check out what this exciting company is
doing. (You can read about it in my newsletter,
, where I covered Solazyme in a recent issue.)
After you take a look, I think you'll see what I see -- which is
that these shares were made for aggressive growth investors with a
long-term time frame to reap outsized returns.
Andy Obermueller does not personally hold positions in any
securities mentioned in this article. StreetAuthority LLC does not
hold positions in any securities mentioned in this article.
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