The shale gas revolution has allowed the United States to tap vast new reserves of gas and oil, but last year's Fukushima nuclear crisis may unleash an alternative blueprint.
There are conflicting signals for green energy investing.
On the one hand, global non-hydro renewable energy generation has grown by 10 per cent annually over the past two decades, while investment reached a new record last year, and banks Goldman Sachs, Citigroup and Bank of America recently endorsed the business case.
On the other, a post-recession pullback in government support has combined with innovation in drilling technology to allow exploitation of oil and gas trapped in shale rock.
Such unconventional fossil fuels are up-ending US energy trade and independence and the economics of coal and wind and solar power at a time when cash is short.
In Japan and Germany, however, the energy picture has been re-shaped instead by the 2011 Fukushima disaster, which triggered a massive shutdown of nuclear power in each.
They have managed, so far, through lower energy consumption.
BP energy data on Wednesday showed that Germany and Japan cut energy use in absolute terms more than any other country last year. In percentage terms, they each cut primary energy consumption by 5 per cent compared with 2010.
To be clear, there were exceptional one-off circumstances which enabled this without energy rationing: in Germany, the continuing eurozone crisis and a mild winter cut demand, and there was a downturn in Japan following the massive earthquake and tsunami.
Nevertheless, under its post-nuclear, 'Energiewende' (energy transition) Germany is developing an alternative system including efficiency, plus massive, decentralised, renewable power and energy infrastructure investment to, for example, link north and south.
Its nuclear closures were expected to hike electricity prices, but these have been capped when the weather favours the country's massive solar or wind power.
More variable power prices could be a forerunner of a new kind of market, where centralised and inflexible plants, including new nuclear, cannot compete in a more dynamic, connected, modular approach to energy generation.
As the International Energy Agency said on Monday, in its 'Energy Technology Perspectives' report, "The most important challenge for policymakers over the next decade will likely be the shift away from a supply-driven perspective to one that recognises the need for systems integration".
Projects versus stocks
That may not comfort investors in the short-term targeting the green energy sector, where listed stocks are largely solar module and wind turbine manufacturers whose value has plummeted as a result of global over capacity.
Consultants Mercer last year anticipated a rising allocation to low-carbon assets.
They argued that governments over time would deal with the threat of climate change with policies which hurt fossil fuel assets.
They also expected innovation in low-carbon energy technologies to undermine oil, coal and gas.
So far, the reverse has been true in both cases.
Governments have slashed support for renewable energy, with one eye on stretched, recession-hit consumers, while drilling innovation has allowed the United States to tap new, unconventional fossil fuels.
For investors, the knack is to target bonds and private equity in renewable energy projects and developers, which have benefited from falling equipment prices, rather than listed manufacturers, plus stocks in efficiency and grid technologies.
London-based Impax Asset Management is one of the best-performing environmental fund managers, and its largest fund, Impax Environmental Markets plc, has prioritised efficiency over renewable energy.
As of end-May, its largest invested sector was energy efficiency, with 31 per cent of assets, followed by waste management (25 per cent); water and pollution control (24 per cent); energy supply (15 per cent); and environmental support services (5 per cent).
In the long-term, the Mercer report will prove correct, as countries carry through plans for hundreds of gigawatts of new renewable energy capacity, lifting stocks after the present shakeout.
Earlier this week, Citigroup analysts painted a bright, long-term future for the clean technology sector: "Annual new investment in clean tech has been around $250 billion for each of the last two years, and this figure is set to grow materially."
Goldman Sachs recently set itself a target for $40 billion investment in such companies over the next decade.
"The clean tech industry is expected to be a rapidly growing market and one that we believe is at a momentous point in terms of the expansion of technologies that will help diversify energy sources and improve the environment," the bank said in its Environmental, Social and Governance Report.
This article was first published by Reuters. Republished with permission.