New Energy Law Is Good for Business

Scores of companies will benefit from the recently adopted energy legislation.

By Jim Ostroff, Associate Editor, The Kiplinger Letter

January 14, 2008

New energy efficiency requirements will spur sales of many next-generation products -- from light emitting diodes to cutting edge biofuels -- to help America go greener.

Suppliers of components for fuel-efficient cars will be big winners as automakers scramble to meet a 40% increase in average fuel efficiency by 2020. They’ll snap up diesel engines from BorgWarner, IHI Corp. and Honeywell’s Garrett. And batteries for hybrids from Johnson Controls and Panasonic. Hitachi, TRW and others will see more orders for electronic and mechanical components.

Lighting manufacturers can also expect their order books to fill up fast. New efficiency regulations for lighting will effectively KO incandescent bulbs by the middle of the next decade. Lighting firms such as Osram Sylvania and Philips can expect huge demand for light emitting diodes, compact fluorescents and pinpoint halogens. Among smaller firms likely to benefit: Element Labs, an LED expert. And Orion Energy Services, a leading player in efficient fluorescents.

Benefiting from the energy law in the long term: Research and development leaders in cellulosic ethanol and other advanced biofuels. The new federal alternative-fuel mandate, which will require blending some 21 billion gallons of cellulosic ethanol in auto fuel by 2022, will be a boon to the likes of Abengoa Bioenergy of St. Louis and Poet of Sioux Falls, S.D. Meanwhile, Novozymes and DuPont will be busy selling the enzymes to break down cellulosic materials.

The expansion of the cellulosic ethanol manufacturing industry should provide an economic boost to more than just those companies making the fuel. Over the next decade or so, around $100 billion will be needed to build around 200 cellulosic alcohol-making plants.

The building boom will be a big plus for steel and concrete manufacturers, as well as for firms that supply the chemicals needed to turn farm wastes into fuels and the computer hardware and software that's needed to control fuel making processes. Ethanol plant construction will be a boon, too, for engineering firms such as Jaks LLC, B.G. Katz, Alico and others that will design a new generation of boilers, fermenters, distillers and other equipment.

Businesses and communities should see benefits beyond the money spent to construct the new plants. In Iowa alone, 10 cellulosic ethanol biorefineries are expected to create more than 20,000 new jobs and pump around $11 billion into the state's economy, according to Paul Erickson, executive vice president industrial and environmental section of the Biotechnology Industry Organization, a trade group.

How? By ramping up demand for new trucks to haul in farm wastes and transport ethanol fuel, materials for new roads and by generating new demand for housing, offices, stores and services to serve the facilities and the people who will work there.

The spending boom won't be limited to the farm belt. "The Southeast should see a large number of cellulosic ethanol manufacturing plants built that will utilize material from softwood plantations and switchgrass that will be planted as the region transitions from pulp and paper manufacturing" to higher value fuel production, says Gerson Santos, vice president for research and development with Abengoa Bioenergy, a Spanish alternative energy company with U.S. operations based in St. Louis.

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