New Strategy Launch
Last September, I commented on General Electric's creation of an impressive portfolio of alternative energy assets, including wind power and the key technology for coal gasification. Now we see the fruition of this strategy, with the launch of GE's new "Ecomagination" campaign. Today's Wall Street Journal (and presumably other national papers) included a multi-page advertising supplement highlighting the environmental benefits GE can bring to bear. Accompanying articles cited GE's commitment to reduce its own greenhouse gas emissions by 1%, compared to expected growth in these emissions by over 45%.

This approach does several important things for GE. First, it capitalizes on the recent implementation of the Kyoto Treaty on climate change, following Russia's triggering ratification last November. This has brought a number of measures into force in countries that have signed the treaty, including mandatory emissions trading in Europe and industry/government accords in Canada and elsewhere. Positioning GE with the right solutions will enable it to capitalize on these new markets, especially in Europe.

Another important aspect of GE's alternative energy strategy is defensive. The rise in US natural gas prices over the last several years threatens GE's sales of gas turbines and other hardware for gas-fired power plants. Electric utilities and generators will respond by shifting back toward coal for new power plants, particularly if the new plants can meet air quality restrictions and lay the groundwork for eventual handling of carbon dioxide emissions. GE's gasification technology--acquired from ChevronTexaco--does both of these things. It also turns the dirtiest coal into clean gas that can be burned most efficiently in gas turbines. So not only does GE sell gasification technology, but by doing so it protects its valuable market for turbines.

"Ecomagination" takes a risk, though. As BP can attest from its "Beyond Petroleum" campaign of several years ago, making a large corporation greener may perversely attract more green critics, by raising expectations that will be difficult to meet. Despite this, I would say GE's move is well-timed and, if executed with GE's customary skill, should pay off handsomely for shareholders.

By the way, Energy Outlook was mentioned in my town's newspaper yesterday, as part of a story on local bloggers.