Of course this is NO news flash to regular readers of the A-Letter. My colleagues and I have been talking about skyrocketing agricultural commodity prices for months now. In fact, our investment director Eric Roseman dedicated a whole series of articles to the global food crisis just last week. If you missed them, you owe it to your portfolio to catch up. You can review Eric’s comments from last Wednesday, Thursday and Friday right now.

Your Food Prices Leap 83% in Three Short Years

According to data from the World Bank “Surging commodity prices have pushed global food prices up 83% in the past three years.”

Officials singled out U.S. corn-based ethanol production and other bio-fuels as a contributing factor to the rise in food prices. Corn prices have soared 56% in the past 12 months alone. About 30% of the entire U.S. crop is being diverted from kitchen tables to ethanol production.

But there’s another crisis looming too, in case the IMF hasn’t noticed…a global energy crisis! With conventional energy prices soaring, it’s no surprise that more money is being diverted into alternative energy, including bio-fuel.

Crude oil has skyrocketed over 400% since 2001 – topping US$112 a barrel last week. Coal, once considered a cheap and abundant source of energy, is now running in short supply as well. The cost of coal has soared nearly 60% this year – to US$63 per ton – and has doubled since July 2003.

So in addition to a global food crisis, the IMF should add the global energy crisis to its list of things to “officially” worry about.

One thing is crystal clear, with fossil fuel prices skyrocketing as supply continues to fall short of rising global demand, alternative energy sources are back in the spotlight and here to stay. These alternatives are more cost effective solutions to the energy crisis than ever before.

Alternative Energy is a Fast Growing Market

The market for alternative energy – including solar, wind, bio-fuels and fuel cells power – grew a whopping 40% last year alone! Alternative energy grew into a US$77 billion industry by the end of 2007, according to industry data from Clean Edge.

But that’s just the tip of the iceberg. The alternative energy sector is set to explode into a US$255 billion market within the next 10 years! The data supporting this miraculous growth is simply staggering. For instance:

• Global production of bio-fuels will grow to US$81 billion within the next 10-years, up from US$25.4 billion last year.
• Spending on solar power generation will expand from US$20.3 billion in 2007 – to US$74 billion by 2017.
• Wind power is projected to grow to US$83.4 billion over the next 10 years, up from US$30 billion in 2007.

Solar and wind power have both enjoyed phenomenal 30% compound annual growth rates over the past 10 years. That growth is set to accelerate in the future as both of these alternative energy sources go mainstream.

The commercial costs of solar and wind power are falling rapidly, making these clean energy sources more cost effective than ever before. In fact, with the soaring cost of fossil fuels, solar and wind power technologies are even cheaper than conventional energy sources in some applications.

Last year global wind power installations reached a record 20,000 megawatts (MW), of power generating capacity. That’s equivalent to the output of 20 conventional coal-fired power plants.

Advances in solar-power technology are bringing costs per megawatt down considerably. As a result, spending on solar photovoltaic systems exceeded US$20 billion in 2007. Obviously, this alternative energy technology has a very bright future.

Almost 800 cities in the U.S. alone have pledged to meet Kyoto targets for reducing greenhouse gas emissions through a greater commitment to renewable energy resources. The European Union has even more ambitious targets.

Emerging Asia is in desperate need of new power generating capacity. Rising fossil fuel costs are putting the squeeze on countries such as China and Japan, leading to more alternative energy investment sources.

Smart Money Pours into Alternative Energy

The huge growth potential offered by the expanding alternative energy sector has notgone unnoticed by well-heeled investors either.

In fact, some of the very same smart-money investors who were early to profit from the 1990’s technology boom - namely savvy venture capitalists – are now just beginning to pour billions into clean energy technology. Investment in the alternative energy sector surged 60% last year to US$148 billion in 2007.

Once again, this is just scratching the surface of the true investment potential in alternative energy today. In fact, the International Energy Agency estimates that “US$16 trillion needs to be invested by 2030 (or about US$600 billion per year) to meet the growth in projected demand for new electricity and fuel sources worldwide.”

You can bet that an increasing share of this spending will find its way into promising alternative energy technologies.

The Best Way to Invest in Alternative Energy

Alternative energy covers a lot of ground. It includes everything from ethanol to solar energy, wind to hydro-electric power. Even fuel cells and high-yield battery technologies are included in the alternative energy sector. That’s why it’s so difficult to choose specific sub-sectors to target – let alone pick the best stocks.

Perhaps one of the easiest ways to invest in the vast growth potential in alternative energy is by making a broad, sector-wide investment. There are a number of exchange traded funds that offer instant diversification among dozens of profitable companies in just one single investment.

I recently recommended one such ETF to my Global Market Investor subscribers. This ETF holds 30 leading alternative energy firms from all over the world. In fact, 65% of the stocks in this fund are listed outside the United States. This gives you the added bonus of diversifying your investment outside the falling buck and slumping U.S. stock markets.

The bottom line here is that growth in alternative energy is an undeniable long-term trend. In fact, this industry hasn’t even scratched the surface of its long-run growth potential, which means this is still a great time to buy.

MIKE BURNICK, Senior Editor & Global Markets Analyst

EDITOR’S NOTE: With ETFs, you truly have the holy grail of offshore investments right here at home. You can diversify in far off regions like Japan, Taiwan, Brazil and Singapore, and still invest right on the NYSE, with your regular stock brokerage account. This May 14 -17, Mike will introduce you to the most exciting ETFs on the planet at our Total Wealth Symposium in Panama. It’s not just ETFs. Mike will be joined by over a dozen investment experts from around the world. These experts will give you their favorite options, currencies, commodities and funds to beat the credit crunch in 2008 and beyond. Still interested in joining us this year? Seats are filling up. So please click here to reserve your seat before we sell out.