Investors Go Gaga Over Green

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Investors are pouring money into alternative energy and so-called clean-tech firms, touted as one of the biggest economic opportunities of the century. No one knows whether clean-tech is the next Internet-sized success story. Analysts warn not to put too much faith in the solar hype.

RENEE MONTAGNE, host:

One stock that striving this week is that of the First Solar Corporation. The company, appropriately enough based on Phoenix, make cells for turning sunlight into electricity. Its stock is up nearly 370 percent since it went public last November. Investors have been pouring money into alternative energy firms and other so-called clean-tech companies.

But investors who put too much faith in the solar hype could get burned, as NPR's Scott Horsley reports.

SCOTT HORSLEY: Venture capitalist John Doerr, one of the oracles of Silicon Valley, calls clean-tech the largest economic opportunity of the 21st century. That's the same John Doerr who famously called the dotcom era the world's greatest ever legal creation of wealth. So is clean-tech the next Internet-size success story or will it crumple like a washed-up sock puppet?

Mr. JONATHAN HOOPS (Analyst, Think Equity Partners): Unfortunately it's difficult to know that you're in a bubble until after it's popped.

HORSLEY: That's Jonathan Hoops, an analyst for the San Francisco investment bank Think Equity Partners. He still sees lots of room for growth in clean-tech, a broad category that includes companies devoted to alternative energy - clean water, clean air and environmental sustainability.

Investors are also seeing green. Analyst Jadip Radgei(ph) of Lux Research says venture capitalists poured $1.5 billion into the clean-tech sector last year - more than double the previous year. Money raised through public stock offerings also soared to more than $4 billion.

Mr. JADIP RADGEI (Analyst, Lux Research): There's been an explosion of interest. There's also been an explosion in the number of companies operating, period.

HORSLEY: The lion's share of clean-tech money that is going to alternative energy projects, especially solar power and biofuels. Radgei says many investors seem to like the idea of making money while helping the environment. He says some companies in the sector will do that; others probably won't.

Mr. RADGEI: In most cases we've also seen companies which otherwise in the absence of this euphoria would not have gotten funded because all the good companies have already been invested so now they're essentially throwing money at whoever takes it.

HORSLEY: That suggests a shakeout will be coming within a few years, with weaker companies failing or being taken over by rivals. That's not all bad, says Slate columnist Daniel Gross. He's written a new book about irrational exuberance called "Pop!: Why Bubbles Are Great For the Economy." Gross says even as some of the early clean-tech companies fail, they'll leave a foundation for the future - like the fiber optic network built by dotcom and telecom companies in the late 1990s.

Mr. DANIEL GROSS (Author, "Pop!: Why Bubbles Are Great For the Economy"): Without Worldcom and Global Crossing and all those dotcom investments, we probably would not have gotten Google.

HORSLEY: Gross says the marketing hype surrounding bubbles also helps to get people thinking. Those who are hearing about alternative energy today might wind up spending on ethanol or solar panels a few years from now, even if they buy it from companies that don't yet exist. So far the hype surrounding clean-tech seems to be outrunning the technology. Press clippings on the subject have multiplied faster than either patents or scientific publications.

Gross says the industry is already beginning to show up in popular culture. He's on the lookout for more signs that it may be over-inflated.

Mr. GROSS: When Hollywood starts making movies or sitcoms that take place at a ethanol plant or a solar panel manufacturing plant, that's when you know it's a bubble for real, because they're always the last to know.

HORSLEY: Gross argues the boom-bust cycle of bubbles helps new industries get off the ground faster than a more orderly process might, even if some overeager investors do get bruised in the process.

Scott Horsley, NPR News.

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