The global financial crisis could not have arrived at a worse time for alternative energy. When I read the comments of many of my fellow bloggers concerning the implications of a recession for the near-term implementation of green energy, advanced technology vehicles, and action on climate change, the spectrum runs from denial to despair. This is understandable, considering how bright the green future looked when oil was on the threshold of $150 per barrel. The world has changed a couple of times this year, and the latest lurch does not very bode well for "cleantech", unless you are in the lemons-into-lemonade mold of The New York Times's Tom Friedman, who sees a "green buildup" as the basis for reviving the economy. With the media issuing moment-by-moment comparisons to the Great Depression and every other economic setback in the history of capitalism, it's easy to lose sight of the likelihood that however bad the next year or two might be, compared to the boom period that has just ended, the economy will recover, and with it, the driving forces that support the shift to cleaner, more efficient sources and uses of energy.
That could be small consolation for companies that have bet their future on a successful green product launch during the next two years. GM's Volt plug-in hybrid car comes immediately to mind. Even if GM survives long enough to complete its investment in mass-producing this "range-extended electric vehicle", the stars are lining up to impede its rapid market penetration. GM hasn't announced its sticker price, yet, but if it is close to the $40,000 figure that GM's Vice Chairman Bob Lutz mentioned earlier this year, then even after the federal tax credit of up to $7,500 for the first 250,000 plug-in hybrids, it would be a stretch for most consumers during a downturn in which car loan terms become stricter. Moreover, sub-$3 per gallon gas prices would stretch the car's fuel savings payout compared to a non-plug-in Prius into decades, rather than just years. The success of the 2010 Volt might depend on the looming recession being an average one, of less than a year's duration, rather than the deep and prolonged downturn that the media and the stock market appear to expect.
The timing of Honda's new Insight hybrid model looks somewhat better. Using a simpler hybrid system than either the Volt or the Prius, it is aimed at more price-conscious consumers. If, as expected, the Insight retails for under $20,000, it would deliver 40+ mpg hybrid performance at price that competes with such non-hybrids as the Ford Focus, or with VW's similarly-efficient Jetta TDI diesel, after tax credits. More radically, a slowing economy might be just what is required to sell not just new cars, but an entirely new model for selling mobility, such as the electric-vehicle-based approach of Better Place--assuming that it can be financed on the scale necessary to have an impact.
Savvy consumers and businesses should recognize that cheaper gas is much more likely to be short-lived this time than it was after the first energy crisis. While OPEC might struggle to cut production enough to defend a $60 or $70/bbl price in the short term, the current credit crunch is already sowing the seeds for slower production growth in the future, as smaller oil companies will be forced to scale back their exploration and production activities, and as national oil companies in Venezuela, Iran and elsewhere are forced to remit even more of their revenues to fund non-energy government programs, rather than their oil & gas capital budgets. That could set the stage for an even bigger oil price spike within a few years. Still, if you are worried about your job, or are struggling to keep up with your mortgage and home-equity loan payments, buying the greenest car on the planet might not be your highest priority for the near future.