SAIC said its plans for 2010 include the introduction of a hybrid Roewe 750 sedan. The new technology could improve fuel effiency by 20% over the existing non-green model of the same sedan. SAIC’s “blueprint” for  new energy vehicles was unveiled this week, according to a report by ShanghaiDaily.com.

Another plug-in hybrid version of the Roewe 550 mid-class sedan that could slash fuel consumption by 50% is due to hit the market by 2012, when SAIC’s self-developed fleet of electric vehicles will start being marketed.

SAIC is partnering with GM and VW on these new-energy vehicles and says its investment on this new category of alternative autos will rise to nearly $900 million (6 billion yuan) because of its focus on hybrid models, and on cars that rely solely on electric power.

As China’s economy has grown in both scale and sophistication, concerns about energy use and the environment have advanced, as well – stoking demand for energy-efficient cars and trucks. China’s automakers have already invested millions in these new transportation technologies, and Chinese carmakers have pushed for mass-production to begin in order to meet this escalation in demand.

Challenges and obstacles abound. Alternative-energy vehicles cost a lot more, and they require a national service-and-refueling “infrastructure” to be able to operate. That infrastructure doesn’t exist in China, right now.

Despite these problems, however, China’s government wants to 60,000 new-energy vehicles – including plug-in electric and plug-in hybrid cars – on the country’s highways streets by 2012.

SAIC has reportedly inked a deal with the Shanghai city government to provide roughly 1,000 new-energy vehicles – including all-electric, fuel cell and hybrids – for the 2010 World Expo.

SAIC has already unveiled several “green” cars over the past couple of years, including a VW Passat Lingyu – a car developed specifically for the Chinese market – and a hybrid Buick LaCrosse sedan (called the Eco-Hybrid).

China’s Chery Automobile Co. Ltd. also said it would launch two hybrid models this year after a pure electric car rolled off the assembly line in February.

According to ShanghaiDaily, China has granted production permits to five models, including BYD Co. Ltd.’s F3 dual-mode electric car, Chongqing Changan Automobile Co. Ltd.’s Jiexun-HEV hybrid and Toyota Motor Corp.’s (NYSE ADR: TM) Prius hybrid, which has battled perceptions that its price is much higher than hybrid models made by rival carmakers.

Source: SAIC, China’s No. 1 Carmaker, to Launch Series of Hybrid Cars

Long-suffering readers know that we’ve taken a contrarian position against hybrid and electric cars as evidence continues to mount against their short-term returns for investors. The flip side of our coin, however, is that we don’t know when these investments will start to show profits for shareholders.

Two data points popped up on our computers in recent days, further substantiating our gloomy view of battery-powered vehicles. The latest sales data on hybrid sales proved grim, while an article in the Wall Street Journal provides anecdotal evidence that the market uptake contradicts the market hype for electric cars.

Automobile Magazine recently reported that hybrid sales tumbled 9.9% in 2008. The consensus was that low fuel prices have deterred consumers shelling out the “hybrid premium,” in which these new fangled cars tend to cost more their gas-powered counterparts.

Even the segment-leading Toyota Prius suffered, with sales plunging nearly 30% in the second half of 2008.

The article quoted Andrew Brown Jr., chief technologist at Delphi Corp, as saying “People want the technology, but it’s got to be economical. That’s the challenge in the industry now: to get the cost of those components down.”

With fuel prices averaging around $1.62 nationwide in December 2008, it would take a Prius owner 70,000 miles to recoup the initial premium ($7000 base) over the similarly sized Corolla, according to the article.

One of the earliest causalities in this tough market is a Norwegian start-up Think Global AS. The Wall Street Journal described Think “as one of the front-runners” in the electric-car segment. Unfortunately, Think investors got caught in the squeeze between PR spin, no cash and cheap gas.

Just as Think was ready to ramp up manufacturing from 350 of its two-seater cars to 10,000, the bottom fell out of the market in every which way possible. The timing was horrible for Think. The worsening cash crunch forced creditors to demand faster payments. In the end, Think filed for bankruptcy protection.

Venture capitalists, the self-proclaimed smartest guys in the room, lost out on Think. The company’s demise came in the middle of venture drought as these super investors cut off cash infusions into green technology overall.

Now with significant incursions by the world biggest car makers into electric and hybrid vehicles, upstarts such as Think and others face more formidable obstacles to success. Still, regardless of how big the player, the economy and enduring low gas prices will continue to hammer green vehicles for investors.

Eventually, hybrid and electric vehicles will hit pay dirt. For the time being, you’re still better off putting your money into a bank CD.

This from Today’s Financial News:

Much of our popular technology is powered by lithium carbonate.

The compound has been used in the creation of heat-resistant glass, ceramics and alloy for aircraft.

It also sees effective use as a mood stabilizer and treatment for ALS (Lou Gehrig’s disease).

But it’s the rechargeable power needs of modern technological devices that made this lightest of all minerals a serious commodity for investors.

Lithium’s value has climbed with the sale of each laptop, PDA, cell phone, and iPod it inhabits.

Whether the motivation is gas prices, a desire to lower one’s carbon footprint, or a reluctance to further enriching nations in the Middle East, demand has increased for hybrid vehicles.

The ONLY practical option for rechargeable vehicles is the lithium-ion (Li-ion) battery.

Now, I say that knowing that Toyota has delayed the installation of Li-ion batteries due to some safety concerns it’s working on resolving. The corrosive quality of lithium gives it the potential to short-circuit in batteries and catch fire.

And there are aging issues with Li-ion batteries and the technology to recycle them is not in place.

These challenges have researchers at hundreds of companies competing to perfect their version of the battery.

But what makes Li-ion batteries so perfect for cars is that they are lightweight and can store more than twice the amount of energy (110 –130 watt hours per kilogram) when compared to its biggest competitor, nickel-metal-hydride (NiMh) batteries.

They also lose power at a slower rate than other batteries between uses.

In August 2008, Mitsubishi Motors Corp. announced it was partnering with GS Yuasa to complete a manufacturing plant for lithium-ion batteries. The company anticipates that demand will increase fivefold to meet the needs of electric vehicles. The new facility is slated to open in the spring – the same time the company expects to launch its Mitsubishi I-MiEV electronic compact car.

Nissan will use Li-ion batteries for the 65,000 hybrids they hope to manufacture by 2010.

Most of the next generation hybrids like GM’s Chevy Volt and Saturn Vue Green Line, and Mercedes’ hybrid version of its S-Class sedan, are planning to use Li-ion batteries.

About the element

Though not uncommon, lithium appears in low concentrations and is typically interwoven with other minerals.

The largest commercial deposits currently mined are in Chile and Argentina. China, Russia, Australia and the U.S. are working to pickup production.

And the amount of lithium carbonate required for a car battery is about 100 times that needed for a laptop.

Bottom line?

• Lithium demand will skyrocket as more and more hybrids roll down the assembly line.
• Current processing potential is limited, making it vulnerable to market disruption.

And limited supplies could mean big profits for lithium miners and processors.

How to play this soon-to-be strategic commodity

In current market conditions, it is possible this renewable technology cannot be explored to the degree anticipated.

But in the longer term, investing in this evolution could bring triple-digit gains in just a few years.

The best way to play it?

New manufacturers are cropping up daily with ever-improved versions of the Li-ion battery. The competition is fierce and it’s difficult to know who will come out on top.

Instead, for our first pick, we are going directly to the source…

Sociedad Quimica y Minera de Chile (ADR) (NYSE:SQM) is based in Chile and is a leading producer of lithium carbonate. The company also sells specialty plant nutrition products, iodines and derivatives and other industrial chemicals.

This past October, the company reported a revenue growth of 56% for the first 9 months of 2008 when compared to the same period in 2007.

Website: http://www.sqm.cl/aspx/en/Default.aspx
Market Cap: $7.04B
P/E: 16.42
Forward P/E: 13.58
Recommendation: Buy shares under $30 and hold for the long-term.

Our second selection is a supplier of the battery manufacturers…

Polypore International, Inc. (NYSE:PPO) is a U.S.-based manufacturer of mono- and multilayer membrane separators for lithium batteries – including those used in hybrid electric vehicles (HEVs).

Website: http://www.polypore.net/
Market Cap: $316.83M
P/E: 7.07
Forward P/E: 9.28
Recommendation: Buy shares under $8.25 and hold for the long-term.

Both these companies have good fundamentals and great potential. We urge you to check them out and see if they are right for your portfolio.

Source: Lithium: The commodity with a profitable future

The thinking goes that if consumers are dumping SUVs there must be an equal and opposite reaction that would create a stampede to green cars. Well, maybe one day consumes will make that stampede. However, the Times’ article shows consumers’ reaction as more of a trickle.

Electric cars will attract a lot of attention at the Detroit Motor Show this week. The luscious booth babes of the muscle cars exhibits are being replaced deer robots in fake forests.

As the Times reports, the major automakers are feeling pressured to pour billions into the rapid development of electric cars when they can least afford it. Apparently, this mad rush into electric cars is driven more by the competition than by actual near-term demand.

The Times writes: “Strong consumer demand has to be part of that equation, too. And it remains unclear whether consumers will be comfortable with the idea of buying an electric car, or whether these vehicles will priced to compete with comparable gas-powered models.”

While Detroit expects financial help from President-elect Obama to both auto makers and consumers, the only subsidized market that really seems to make investors money is the military.

Currently, Ford plans to make only 10,000 of the electric vehicles a year at first — very few by Detroit standards — to test the market cautiously, according to the Times.

Now take into consideration that Toyota, Nissan, Mitsubishi, Subaru, GM, Chrysler and host of upstarts are rushing into this market, and you see that the casualty rate will be pretty, darn high (with triage coming from U.S. taxpayers).

Chevrolet has been touting the forthcoming Volt at a price of $40,000. With 2 million people losing their jobs and last, and another 2 million expected to join the ranks of the unemployed in 2009, who has the money to spend on that when their 2003 Chevy Trailblazer is chugging along just fine?

No one has money to spend on any new car…gas prices are still down…and battery technology still remains in its infancy.

If you contemplating an investment in electric cars, we recommend that you hit the brakes now.

The EIA report says that increases in fuel-efficiency standards, use of renewable fuels and advances in technology will translate into less dependence on imported oil. At the same time, the reports projects that hybrid vehicles will comprise 38% of total sales by 2030 – a hefty share if any investor is willing to wait 21 years for that kind of growth.

While some form of battery-powered vehicle will emerge in the coming decades, the U.S. market will also see a diversification in fuel consumption flex-fuel, hybrid, and diesel vehicles, according to the report.

While this growing adoption of new fuels is bound to impact the sales of hybrid and electric vehicles, Detroit is ramping up production of small fuel-sipping cars that could meet or exceed the mileage of any kind of car with a battery.

It’s going to be a zero-sum game when it comes to oil imports versus gasoline consumption. The EIA reports that overall liquid fuel demand will increase by 1 million barrels per day between 2007 and 2030, during which we’ll see a dramatic increase in miles per gallon among different types of fuels.

During this historic transition, hybrid vehicle sales will rise from 2% in 2007 to 38% in 2030 (sales are tracking at around 2.4% for 2008), with full and mild hybrid systems accounting for most of that. Sales of plug-in hybrid electric vehicles (PHEVs) are expected to grow to 90,000 vehicles annually by 2014, supported by recently enacted tax credits. By 2030, PHEVs account for 2% of new light vehicle sales.

These numbers clearly show that hybrids will be the green vehicle of choice over PHEVs — or will they?

Ford CEO Alan Mulally said earlier this month that it will stay the course of bringing small, fuel-sipping cars to the marketplace.

Mulallay believes is betting that fuel prices will stay relatively high, and that consumers will continue to adopt small cars. This is certainly true, but the questions looms if Americans are willing to pay more for a hybrid than a cheap, high-mileage gas car.

These sub-compacts and microcars produce profit margins of $2,500 to $3,500 compared with $8,000 or more in profit for SUVs and pick-up trucks. So while Ford will manufacture and import these tiny cars, the other question that needs to be asked is where Ford will put its marketing dollars? Into microcars or SUVs?

The other consideration is safety. It’s hard to believe that SUV-driving soccer moms will be real eager to shuttle around their kids in something like a Chevy Aveo.

Bottom line is that hybrids could be the vehicles of the future — 21 years from now. Are you willing to wait that long?

I’ve been reading about a new crop of garages that convert hybrid cars such as the popular Toyota Prius into all-electric vehicles. Once you consider the economics of this folly, you see why electric cars are a fallacy for both the owner and investors looking for a toehold in this burgeoning market.

I read my first story a few months ago. It was about the Luscious Garage in San Francisco. Run by women, they carved out a juicy niche for themselves by yanking out the gas engine in hybrid cars and replacing it with another set of batteries. The job cost about $7,500.

More recently, I read another story about a similar operation — this one across San Francisco Bay in Berkeley. Run by two guys, they’ll do the same thing for $7,000.

Regardless of who you used for the conversion, the results were pretty much the same. Instead of filling up at the pump, you plugged your car into a socket. Let’s forget, for a moment, that you’re still burning up fossil fuels from your local power plant and instead focus on the feel-good economics of actually operating the cars.

In both cases, the writers of these articles interviewed the cars’ owners. What you get are comments like this when asked about shelling out $7,000 and more for the conversion…

“My carbon footprint concerned me more…”

“We don’t like what oil is doing to the world…”

One piece in CNN included a gentleman named Dave Moore. A resident of Washington state, CNN said Moore had “started down the electric-car path when he became worried about climate change. On the waiting list for an $85,000 Audi sports car, he decided to buy a Prius instead and got it converted to a plug-in car for about $10,000. He figures he has a green car for less than half what the Audi would have cost.”

That may in fact be true, but that doesn’t make it a valid business case for investors.

When it comes to making investments in green technology for the road, only one thing matters: ROI.

Carbon footprint, sticking it to the sheiks or that butt-tingling smugness as you sit in rush-hour traffic won’t cultivate a new industry. When you’re pitching fuel economy, it’s all about the economics.

So I ran a few numbers to see what the ROI would be on a hybrid-to-electric conversion just to get an idea of whether or not electric cars are something for investors should consider for future growth. Here’s what I came up with…

The average price of a gallon of regular gas today is $1.65 according to Consumer Reports. And the average driver logs 12,000 miles per year, using 550 gallons of gas, says the AAA.

For the $7,500 conversation, the ROI is 12 years for your average driver at today’s gas prices. For the $7,000 conversion, the ROI is 7.7 years.

Anyone can see that a 12-year ROI is ludicrous in terms of trying to sell an electric car. We’re not even sure the batteries would last 12 years. And as far as 7.7 years goes, well that’s marginal – again assuming that all the batteries can hold a charge of that long.

Now, what I didn’t take into account is the approximate $5,000 premium that people are paying for the privilege of buying that stock, hybrid Prius in the first place over the price of a gas-powered economy car such as the Honda Civic. If you want to tack on that extra $5,000, you’ll see that the ROI is simply absurd (or maybe not as absurd as Moore’s $10,000 Prius conversion).

What do these numbers mean in the real world of major automakers?

It means that electric cars could become nothing more than window dressing for empty showrooms. Sure people will flock to the Chevrolet dealership to see the impending Volt for about $35,000, but they’ll drive out with an econo-box Aveo for $12,600.

And why not?

You would have to drive the Volt for 13.5 years longer than the Aveo to justify the price difference at $1.65 per gallon.

So if you want to invest in an industry that strictly caters to people worried about their carbon footprint, well, more power to you.

This from Investor’s Daily Edge:

In early June, CNN Radio called and asked me about gas prices and autos. The first question was more like a statement. The radio host said that people were forsaking big cars and flocking to smaller models. And wasn’t that great? He added that the American consumer should be congratulated for being so willing to save on energy.

He couldn’t see me shaking my head in disagreement. I told him we haven’t turned into a nation of tree-huggers yet. And congratulations are a little early. Consumers are simply responding to price. When gas goes up, smaller cars look more attractive.

I told him it works in the other direction too. When gas goes down, bigger cars start looking better.

Since then, gas prices have fallen by more than half in most parts of the country. So what has happened?

People have begun buying pickups and SUVs again. You couldn’t give them away earlier in the year. See more of my thoughts on this in the IDE issue from December 9, “Can It Really Get Worse Than This?”.

The economics of buying a hybrid no longer makes sense. You’d have to keep your car for about 10 years to make up the extra money you spent on the car.

The ones buying these cars now are really tree-huggers.

So should auto companies spend tens of millions of dollars on R&D for cars that nobody is buying right now? Or should they keep making the bigger cars that Americans seem to love?

First off, it’s not a question of doing one or the other. It’s more a question of how fast U.S. auto makers should reduce their reliance on bigger vehicles.

A so-called “car-Tsar” would quicken the process.

Putting a “car-Tsar” in charge of the auto industry would put the government in the driver’s seat. The auto industry would be effectively nationalized. Say good-bye to the free market. It’s road kill.

But the triumph of the government didn’t happen overnight. The current auto crisis may have cemented the government’s victory. But the government has been telling the auto industry what to do for a long time.

Safety regulations date back decades. As do the Corporate Average Fuel Economy (CAFE) regulations.

CAFE regulations are already forcing auto makers to make more fuel-efficient cars. They call for auto companies to make vehicles that get at least 35 mpg by 2020. And every couple of years between now and then, U.S. auto makers will have to produce cars with better mileage.

So by 2018, for example, to reach 35 mpg will only require a small jump.

Will the American consumer want more fuel-efficient cars or not? It doesn’t matter. They don’t get to decide. The decision has already been made for them.

A nationalized auto industry may not be good for the economy. It may not be good for the auto industry. But it’s a gift from the government to you as an investor.

Markets are hard to predict. Government policy isn’t. Government policy is literally an open book.  You want to know what the government is thinking? Go look it up.

As investors, what more can you ask for?

So this is what I can say about the future of the auto industry with complete confidence…

• Cars are on the fast track to going hybrid
• By 2020 nearly all cars will be hybrids
• The dominant hybrid technology will be lithium-ion batteries.

Why lithium-ion? They have two times the capacity of the currently used nickel-cadmium batteries. They have half the weight. And, unlike nickel-cadmium batteries, they perform superbly in very hot or cold weather.

The problem is nobody is making them. And companies that are planning to make them will need at least two years to achieve full-scale production.

But, actually, there is one company making them right now. They are already supplying a European car maker with these batteries under a $70 million contract.

The company I’m talking about is Ener1 (AMEX:HEV). And while the S&P 500 lost almost 20 percent over the past year, Ener1 gained 40 percent.

It’s a small company. Its market cap is $750 million. Once finished, its facilities could generate revenue of over $300 million.

Ener1 is talking to about 30 car companies interested in their battery technology. The company has an awesome future. And it’s practically guaranteed by the U.S. government. That is why HEV is my top stock pick for 2009.

Source: The Future of the Auto Industry Is Already Written

As of 2007, when gas prices were on the rise, the price premium for a hybrid (a gas-electric vehicle) was about $5,000 versus a conventional gas-burning vehicle. Even at those higher gas prices, the break even for a hybrid compared with gas was six to 10 years. Today, with gas down 2005-2006 levels, we can only estimate that the break even for a hybrid would be extended to 10-15 years.

These numbers don’t compute for a country in the throes of recession. Since the start of the recession in December 2007, as recently announced by the National Bureau of Economic Research, the number of unemployed people surged by 2.7 million, and the unemployment rate rose by 1.7 percentage points.

With people out of work, the argument that higher prices at the pump would translate into more sales of hybrid and electric cars is on the verge of crumbling. We can see it today. Gas prices at their lowest in years, but no one is spending money on anything — simply because they don’t have it. And it will likely take consumers years to get back on their feet.

The brilliant Dr. Chu, director of the Lawrence Berkeley National Laboratory, has flogged the notion that it takes a combination of regulation and higher prices to rein in energy consumption. He advocates that the U.S. tax gas to the levels of Europe and Japan, forcing American consumers and the auto industry into a green lifestyle.

But the underlying assumption here is that consumers have money to spend, and that they’re willing to spend it on the green-car premium.

While the Big 3 surrender, waving the green flag in the halls of Congress, Detroit still hasn’t proven that it can make a red cent on small cars. And even if they can pad in a modest margin, they still find themselves in the quality battles they have consistently lost to German and Japanese car makers.

Now we’re seeing a return to higher gas prices as drillers cut back on exploration.

Oil and gas drilling activity in the U.S. in the wake of falling energy prices.

In its weekly accounting, Baker Hughes Inc. reported Friday that the number of drilling rigs working in the U.S. had fallen to 1,790, down 12% from the September peak and down 2% from the same time last year.

Given that rising gas prices are in the cards, it seems that consumers will now be forced to stay home rather than try to conserve fuel through green vehicles for years to come.

MidAmerican is 87.4% owned by Buffett’s Berkshire Hathaway Inc. (BRK.A, BRK.B), which just last week paid $5 billion for a stake in Goldman Sachs Group Inc. (GS). Buffett’s vote of confidence for Goldman was enough to lure skeptical investors back into the treacherous financial services sector and boosted Goldman Sachs’ shares by nearly 10% over the two days following the announcement.

Similarly, shares of BYD (Build Your Dreams) shot up 42% in Hong Kong Monday following MidAmerican’s decision. BYD’s stock had tumbled 56% since hitting its 52-week high last October.

The purchase also marks Buffett’s first large investment in China following the sale of Berkshire’s stake in PetroChina Co. Ltd. (ADR: PTR) last year. After cautioning investors against the Chinese stock market at a time when it was just beginning to peak, Berkshire sold 28 million shares of PetroChina, netting a profit of about $3.5 billion from what had been a $500 million investment in 2003. PetroChina has lost roughly half its market value since Buffet divested Berkshire’s stake.

Buffett now appears ready to test the fast-growing Chinese market again, and a stake in BYD opens up brand new opportunities for MidAmerican, a diversified energy-products company, and for BYD, a builder of electric cars that has some ambitious objectives.

The global auto industry is just one worldwide business sector pushing to capitalize on China’s tremendous long-term promise. China’s auto market is expected to advance at an 18% clip this year. The U.S. auto market is in the midst of an 11-month slump, its longest since a 14-month slump that took place in 1991. New car sales are expected to fall 17% this year, Bloomberg News reported.

The Shenzhen-based BYD is actually a battery manufacturer that plans to advance its business by selling plug-in electric cars in China by the end of this year. It intends to import those cars into the U.S. market by 2010.

BYD’s lithium-iron phosphate batteries give the company’s F6DM, or Dual Mode, mid-sized sedan the ability to travel 62 miles in all-electric mode before traveling an additional 205 miles on gas power. BYD’s F3DM, a smaller and less expensive model, reportedly has a 100-mile range in electric-only mode. By comparison, the recently unveiled General Motors Corp. (GM) Chevrolet Volt can go only about 40 miles before it needs the gasoline engine.

MidAmerican Chairman David Sokol told The New York Times that his company was impressed by BYD’s ability to produce electric cars that have a range of almost 190 miles on a single charge, and can be 80% recharged in just 15 minutes.

Sokol also pointed out that plug-in electric cars may be more adaptable to the United States market than cars that run on hydrogen or ethanol because there is already existing infrastructure to supply electricity for recharging almost anywhere, whereas hydrogen or ethanol stations and supply routes would have to be established across the country.

“We can drop these charging stations anywhere,” Sokol told BusinessWeek. “If you want a rapid charging one in your garage it will cost between $2,500 and $3,000 to install.”

The annual energy cost to run a BYD-made electric car, based on 12,000 miles of driving per year, would be about $400, Sokol said. That compares to $2,400 for a traditional gas-powered car with fuel priced at $4 per gallon. Also, the energy consumed by an electric car in the U.S., assuming the national average of 51% of power supplied by coal, would produce half as much carbon dioxide as a gas-powered automobile.

BYD sold 85,104 cars in the first eight months of the year, a 35% increase from 2007. The company, which is widely known as a leading producer of cell-phone batteries, estimates that auto sales will make up 30% of its 2008 revenue, up slightly from 25% in 2007. And with Buffett’s help, BYD may see even faster growth, as the Berkshire name brings newfound credibility to a relatively unknown carmaker.

“Warren Buffett is very well respected globally as well as in China, so as an investor he will help us build our brand,” BYD Chairman and Chief Executive Officer Wang Chuanfu told BusinessWeek.

Wang also said that Buffett’s involvement could accelerate the BYD’s transition to the U.S. market, and noted that MidAmerican Energy could be a big part of his company’s future plans.

“Developing our electric vehicles requires a lot of energy, which MidAmerican Energy can supply us in the future,” Wang said.

Michael Dunne, managing director of J.D. Power China, recently called the tie-up the “most exciting news in China’s auto history.”

Berkshire is a “formidable investor, which brings confidence to the picture,” Dunne said. “BYD can say ‘Yeah we can do this.’”

Source: Berkshire Stake Brings Confidence and Credibility to Top China Electric Carmaker BYD

But an even bigger problem has been the coming expiration of energy tax credits for the manufacturing, production and use of alternative energy systems and devices at the end of 2008. This situation has now changed with the $18 billion Renewable Energy and Job Creation Act of 2008.

David Fessler at Investment U says three alternative-energy ETFs should see “big moves” in the remainder of 2008 and in 2009 on the back of the bill.

Although the House of Representatives still has to approve this version of the bill, once they do the President has indicated he would quickly sign it into law.

Here are some of the bill’s highlights:

• Tax credits for wind generation facilities would be extended through 2010.
  
• Tax credits for solar, geothermal, marine (tidal) and biomass, municipal solid waste, trash combustion and hydro power plants would last through 2011.
  
• Residential energy efficient property tax credits would run through 2014, and the bill allows for up to $4,000 of solar energy tax credits for homeowners who install such systems.

Here’s one bound to get automakers excited: A new tax credit for the production – and purchase – of plug-in electric vehicles.

It’s been estimated that existing hybrid vehicles can be converted to true plug-in hybrids for an additional $3,000 to $5,000, and this credit might just be the catalyst that gets big automakers moving.

Felix Kramer, co-founder of CalCars.org – an organization which promotes plug-in hybrid electric vehicles – thinks it will happen: “This will have an enormous impact, and could conceivably entirely remove the cost increment that carmakers say is the cause of their reluctance to build plug-in vehicles.”

And car buyers come out big, too. If you purchase a plug-in car or truck, your credit could be as much as $7,500.

Other provisions of the bill provide tax credits for installing non-hydrogen alternative fuel refueling stations. Biofuels, anyone?

One provision even allows you to deduct your bicycle commuting expenses from your gross income. Being a cyclist, I’m particularly fond of that one.

The previous legislation was primarily focused on residential and manufacturing credits for solar. While they’re still included, the new bill goes a lot further, allowing utilities to take advantages of the credits, too, and in the case of solar, extends them for up to eight years.

Three Ways to Profit

This will likely jumpstart a wave of green power plant construction projects and the bill includes $800 million in bonds to help fund them. However, existing green-power producers win as well, as the bill extends production tax credits for another year for wind and for two years for solar, biomass and hydropower.

Thinking about installing solar panels on your home’s roof? Now might just be a good time to get started, as the bill extends solar investment tax credits for homeowners to eight years, and removes the existing $2,000 cap on the credits.

And if you live in the Midwest where the wind is nearly constant, you might want to consider your own wind-driven power plant. The bill includes a $4,000 credit for homeowners who install small wind generators for power generation.

Of course, there’s always the issue of how tax credits will be paid for. It was initially envisioned as a tax on oil and gas producers, but that might have killed the bill. Instead the IRS is delaying certain tax deductions for these producers, which has a net effect of having them pay for it anyway.

Clearly wind and solar companies will be big beneficiaries of this bill. Last week, we talked about the Market Vectors Global Alternative Energy ETF (NYSE:GEX) as a way to play the entire alternative energy space.

However, if you want to focus specifically on wind power, there’s the First Trust ISE Global Wind Energy Index Fund (NYSE:FAN). For the solar buffs, there’s an ETF made up entirely of solar companies, the Claymore/MAC Global Solar Index (NYSE:TAN).

All three of these ETFs should be big movers in the remainder of 2008 and 2009 as alternative energy companies begin to gear up production as a result of this exciting legislation.

Source: Alternative Energy Gets a BIG Green Light…