When people talk of renewable or alternative energy sources, they are normally talking about wind and solar. These sources have come a long way in recent years, but the intermittency of these energy sources continues to be a significant issue. Hydropower and nuclear energy are also available as energy alternatives, but they too have their drawbacks. While these are four of the most common alternative energy sources, there are others that have the potential to make a significant contribution to the energy industry. Three of these other sources are discussed here.
Image Source: Getty Images
Energy-from-Waste
Admittedly, burning things to create energy is not very original; it's been done by people for thousands of years. However, Covanta Holding's (CVA) approach is different than most. Covanta takes trash that would normally be headed to landfills and burns it to create electricity.3 The gases produced by the combustion process are treated to remove most of the resulting pollutants. Metals contained in the ash are also removed and recycled. "Covanta's Energy-from-Waste facilities annually convert approximately 21 million tons of waste into power for over one million homes and recycles approximately 500,000 tons of metal." The company operates primarily in the United States; however, management's focus for growth is generally overseas as they see foreign markets as have the more attractive prospects.
Wood Pellets
To many, wood pellets may not seem very alternative. Even more than burning trash, burning wood has been around for a long time. Nevertheless, companies like Enviva Partners, LP (EVA) are participating in a process that is more similar to that of Covanta and the Energy-from-Waste industry than one may think. This is because the source of the wood pellets is low-quality wood and/or waste wood from other industries that has little to no commercial value otherwise. If not utilized by Enviva, then it would be left on the ground to rot or disposed of in some other way. Instead, Enviva produces pellets out of it which are shipped primarily to Europe where they are burned to generate electricity in place of coal thereby reducing the carbon footprint of the power plants.
Geothermal and Recovered Energy
Most people are familiar with the idea of geothermal energy. It is simply using the heat from the Earth to create electricity. Recovered energy is similar; it "comes from residual heat that is generated as a by-product of gas turbine-driven compressor stations, solar thermal units and a variety of industrial process, such as cement manufacturing." Geothermal and recovered energy production is the primary business of Ormat Technologies, Inc. (ORA 0.77%). Ormat builds geothermal and recovered energy power plants that it either owns and operates or sells to customers. The company's revenues are split fairly evenly between the United States and international operations; however, international operations as a percentage of revenues has been increasing in recent years.
Conclusion
Given the current environment around fossil fuels, the future of energy in the long run is almost guaranteed to be centered around renewables. Yet despite being the current favorites, solar and wind have significant drawbacks of not being consistent or appropriate in all places. Therefore, I believe that energy investors should look for other alternative energy investments in which they can allocate a portion of their capital. Covanta, Enviva, and Ormat along with their respective industries are already making contributions to the energy sector and could provide valuable diversification to a portfolio. I will be adding them to my watchlist as I evaluate them for future investment.
