Alternative energy technologies including solar and wind power are too often promoted as a cure for all of the world’s energy challenges. For much of 2009 the companies selling such technologies were pitched as a play on government stimulus packages, the Obama presidency and a US climate change bill that would regulate carbon dioxide (CO₂) emissions.

Don’t buy the hype. Wind and solar power–promoted by governments all over the world–will grow in coming years, but this growth will come from a low base, as the chart below illustrates.

Source: Energy Information Administration

The date here are Energy Information Administration (EIA) estimates of global primary energy use in 2010 and 2030. Primary energy consists of energy used for all purposes, including oil for transportation, gas for heat and electricity produced from a wind turbine. Primary energy consumption is typically measured in quadrillions of British thermal units (BTUs), or simply “quads.”

The world uses about 500 quads of energy today and is forecast to use nearly 680 quads in 2030. The big four–oil, natural gas, coal and nuclear–account for more than 91 percent of total energy consumed today. The EIA projects that the same four fuel sources will still account for more than 89 percent of global energy use two decade from now.

These figures likely overstate the importance of the most widely hyped alternatives, solar and wind power.

Source: Energy Information Administration

This chart shows total US renewable energy generation in 2010 by fuel type. Hydroelectric power plants account for close to 60 percent of renewable energy generation. Of the remainder, wind is far and away the most viable; solar accounts for about 1 percent, geothermal just 4 percent.

A look at just US non-hydroelectric renewable energy generation is even more grim.

Source: Energy Information Administration

The EIA projects that the most important source of US non-hydroelectric electricity generation in 2030 will be biomass, which will account for nearly half of the total. Much of this biomass generation would presumably come from burning wood and wood waste products.

The Oil & Gas Journal recently broke down exactly what this means in terms of wood demand. Assuming an average conversion efficiency–the percent of energy in fuel that’s becomes electricity–of 40 percent for wood-fired plants, the US would need to devote as much as 29 percent of its commercial timberland to producing fuel woods in order to meet the EIA’s biomass generation forecast.

And this assumption is aggressive; 40 percent is the average conversion efficiency of coal plants, but wood-burning plants aren’t likely to meet that benchmark. Burning wood to produce power is hardly the advanced technology most investors envision when they think of “alternative” or “renewable” energy.

There are plenty of other problems with technologies such as wind and solar. The most obvious is that the current grid isn’t capable of storing energy in meaningful quantities; the power demanded must balance with the power being fed into the grid at all times. But power output from wind and solar installations is highly variable.

Two weeks ago I visited the island of Curacao in the southern Caribbean. One morning I rode an all-terrain vehicle to the less populous northern side of the island, where I could clearly see dozens of wind turbines installed to take advantage of the consistent wind in the region. However, most of the wind turbines visible from my vantage point were motionless; I learned from conversations with several locals that this isn’t uncommon. In fact, some deride these turbines as wind “statues.”

Power output from a wind turbine is related to the cube of wind speed. Therefore, a doubling in wind speed produces an eightfold increase in power output; even minor changes in wind speed have major impacts on the power supplied to the grid. The generating capacity–the maximum power output–of wind turbines is rated assuming a wind speed of roughly 30 to 32 miles per hour (mph). If the wind speed drops to 80 percent of this range, the actual output from a wind turbine will be just half its rated capacity.

And anyone who lives near a wind farm will tell you that often many of the turbines aren’t turning at all. A minimum wind speed of around 10 mph is required to power the plant; at 10 mph output is just 3 percent of rated capacity. Because wind turbines rarely operate at their rated capacity, even if turbines are built at a breakneck pace it doesn’t mean that it represents actual power making its way onto the grid.

I don’t quote these statistics to disparage alternative and renewable energies; rather, my intention is to lower expectations and dispel the idea that renewable energy will become a key source of electric power over the next two decades. It’s the height of irresponsibility for the industry’s promoters to make the claim that solar, wind or any other alternative energy technology is an easy solution to the world’s energy troubles.

There are good plays in the industry, but be wary of anyone pitching alternative energy stocks as a “sure thing” for investors.

In fact, quite the opposite has been true in 2010: Widely hyped solar and wind power companies have handily underperformed the broader markets and the energy sector as a whole so far this year. One reason for that is simple politics: Alternatives are completely dependent on government subsidies and mandates for growth.

One of the reasons alternative energy stocks rallied in 2009 was the promise of a cap-and-trade bill in the US. Because wind and solar plants generate no CO₂ emissions, they would benefit disproportionally from such legislation. Monies raised by charging for carbon emissions were to be partly used to subsidize alternative energy. The bill that circulated around Congress last summer also included a renewable fuel standard that would have required greater use of solar and wind.

The entirely predictable lack of consensus at the Copenhagen Summit in December coupled with the loss of the Democrats’ supermajority in the US Senate make a cap-and-trade bill in the US a remote possibility in 2010. The most likely outcome remains that a scaled-down, bipartisan energy bill that includes subsides for other environmentally friendly technologies such as nuclear and natural gas–the real alternative fuels for the next 20 years–reaches the president’s desk.

Natural gas is already gaining fans on Capitol Hill, and legislation to promote greater use of the fuel is making its way through Congress. Meanwhile, President Obama has proposed tripling the $18.5 billion in nuclear loan guarantees promised in the Energy Policy Act of 2005 to $54.5 billion. Nuclear- and natural gas-levered stocks are likely to get more attention than and to outperform wind and solar names this year.

Five Bucks a Month

I’ve been speaking at investment conferences and for smaller investment groups for more than seven years. By far the most common question I’m asked is “What’s your top stock pick right now?”

Investors always want to come away from each workshop with at least one or two high-quality investment ideas; for me the problem has always been narrowing down my favorites to just one or two names.

Every week, I have a working lunch with my colleague Yiannis Mostrous, editor of The Silk Road Investor. As you might imagine, the conversation inevitably turns to the market and our favorite stocks and investment ideas. These lunches have evolved into a sort of friendly competition over who comes up with the best ideas; the competition and need to defend my views has certainly inspired me to flush out some profitable investment ideas over time.

Last October I was at Yiannis’ home for a late-season barbeque. Over a glass of wine and the remnants of a rib eye we came up with a simple concept: Why not offer the ideas we come up with in our weekly meetings to our broader subscriber base?

Even better, why not address investors’ desire for a straightforward, clear investment idea–a top stock pick–each month by leveraging the fruits of our conversations and debates?

That’s the idea behind our brand new advisory, Stocks on the Run. Each issue, on the first Monday of the month, contains a single stock recommendation vetted by both of us along with the basic rationale for buying. The service is designed to be simple and straightforward — no lengthy economic analysis, no extraneous commentary about the broader market, just a simple, profitable stock to buy now.

The service won’t leave you hanging. Each monthly e-mail will contain advice on what to do with prior recommendations, and we’ll send out alerts as needed to update recommendations between issues.

Our February pick–a play on agriculture–is already on the move, and we’ve identified a short list of candidates for the March play. We’re meeting next week to make the final decision on our next pick.

We wanted to make this service affordable, so Stocks on the Run costs just $5 per month, a nominal fee to defray the costs associated with running the service. You can cancel at any time.

Interested in finding our more about Stocks on the Run? Click here.

If you sign up today you’ll receive our February pick immediately. Our next Stock on the Run will be released Tuesday, March 2.

Act Now

Are you serious about investing in energy? Join Elliott Gue in sunny San Diego, California, April 23-24 for the 2010 Wealth Society Member Summit. You’ll have a chance to sit down with Roger one-on-one to talk about where to find the best ideas to generate total returns as Canadian income trusts convert to high-yielding corporations and how to position your portfolio for the year ahead.

Join Elliott and his colleagues GS Early, Roger Conrad, Yiannis Mostrous, and Benjamin Shepherd at the historic Hotel del Coronado–one of the top 10 resorts in the world according to USA Today, one of the top 20 hotel/spas in the world according to Travel + Leisure, and the No. 2 place in the world to get married, according to the Travel Channel.

And on April 23-24, Coronado Island will also be the best place in the world for relaxation and profit. We’re expecting 72 degrees, sun and fun. You may find all details at www.InvestingSummit.com.

Call 1-800-832-2330 (between 9:00 a.m. and 5:00 p.m. EST Monday through Friday) or go online now to reserve your seat at the table. Space is limited.